SatoshiDice, lack of remedies, and poor ISP options are pushing me toward "Lite"

[ErebusBat]

TL;DR ^^^

If this has been stated before then please smack me.


It is important to remember the difference between privacy and security.  The are different, although often confused.

If you use a properly designed client (electrum for instance)  then you sacrifice no security, only privacy (arguably).

The worst thing a central server could do to you is lie, it could not permanently alter the blockchain.  Because you broadcast your TXs through the server they could potentially track that you own which address, although I think you can tunnel electrum through TOR if that is a concern.

[gmaxwell]

If you use a properly designed client (electrum for instance)  then you sacrifice no security, only privacy (arguably).

Pedantically, an electrum server can put you on a not-longest fork, and from there could give you fake payments which look confirmed (electrum is gradually getting better too, so in six months this may no longer be true).

More generally, if most Bitcoin users follow your reasoning bitcoin itself will be insecure— subject to theft, inflation, etc.  Because the marginal personal security/privacy cost is low (and likely to be underestimated due to hyperbolic discounting and underestimation of small risks) in running a reduced node we have a tragidy of the commons risks where almost no one honest runs full nodes (except attackers as they have a clear incentive!) and the network dies.  To address this we should strive to minimize the cost of running a full node (relative to technology) and we should produce altruistic software which automatically runs a full node on hardware that can handle it without burdening the user.

[dree12]

If you use a properly designed client (electrum for instance)  then you sacrifice no security, only privacy (arguably).

Pedantically, an electrum server can put you on a not-longest fork, and from there could give you fake payments which look confirmed (electrum is gradually getting better too, so in six months this may no longer be true).

More generally, if most Bitcoin users follow your reasoning bitcoin itself will be insecure— subject to theft, inflation, etc.  Because the marginal personal security/privacy cost is low (and likely to be underestimated due to hyperbolic discounting and underestimation of small risks) in running a reduced node we have a tragidy of the commons risks where almost no one honest runs full nodes (except attackers as they have a clear incentive!) and the network dies.  To address this we should strive to minimize the cost of running a full node (relative to technology) and we should produce altruistic software which automatically runs a full node on hardware that can handle it without burdening the user.

Wasn't there a proposal before to pay full nodes? That idea could possibly be explored more, though it would require a hard fork.

[Sergio_Demian_Lerner]

I will add my grain of salt to the discussion.
First, regarding miner´s incentives, this is an excerpt of my paper "Mavepay".
(It adds little new matter to what was said, only the idea tha miners could be required to do more work than the rest of the nodes)

From the game-theoretic point of view, Bitcoin miners do not have a strong incentive to protect end-users resources. In the long term miners may want to protect the end-users in order to maintain the value of their savings in the virtual coin, and the fixed cost of the infrastructure acquired for mining. But miners can at any time sell their coins and start mining for other P2P currencies, so the incentive is not strong enough. In the short term, they compete to collect fees, even if the transactions included in a block impose a high workload on the end-users. If miners were forced to store, transfer or compute much more data than end-users, then they would choose transactions of shorter length and lower CPU usage. In Bitcoin transactions are checked only once before the block mining process can start, and the quality and quantity of the transactions included in a block does not alter the winning probability significantly for a miner. The block size may affect slightly the dispersion time of a block across the network, and so may reduce the chances of a miner winning over a currently competing short-sized block. But currently this is not a limiting factor on miners, since blocks travel fast, and the diameter of the Bitcoin network is low. Also if a greater time is required to check a transaction, then the time when the block mining can effectively begin is postponed in that same amount. But transactions are checked only once, and each block mined requires a hashing effort orders of magnitude higher than the time required for transaction verification. So the CPU resources used in transaction verification during mining have little effect on the block cost and almost no effect on miners revenue.

[Sergio_Demian_Lerner]

Second, there are other solutions to the tragedy of the commons "problem" with fees. One of the is fee confiscation. This is another excerpt of the paper:

10.6.1. Fee confiscation. In this scheme, part of the fees collected by a miner get “confiscated”. When a transaction with fee f is included in a block, the miner applies a predefined multiplier x to the fee f. The miner can only collect x ∗ f and the rest is confiscated. The multiplier x is always lower or equal to 1.The longer the message, the lower the multiplier. The slower the cryptographic operations required by the transaction, the lower the multiplier.
As an example, if CPU usage was the only factor to consider to calculate the cost of a transaction to the network, then a transaction which requires 100 times more time to evaluate than other would have a multiplier that is 100 times lower. Because miners always choose the transactions that give them the higher reward, then users would be forced to compensate the punishment of confiscation by increasing the fees by the same factor for those commands.
CPU usage is not the only factor to consider when calculating the cost of a transaction to the network as a whole. All expensive resources already  described must be considered to design a realistic function that takes into account average costs and tries to anticipate how those costs will evolve in the future.
As fees are reduced by the multipliers, is necessary to restore the remaining money (1 − x) ∗ f to the network to avoid destroying it. One possible solution is to accumulate all the remaining fees and setup a price to be awarded to the miner of the following block. To prevent the miner from trying to delay broadcasting a block in order to mine the next, we can setup the price to be awarded to the miner of some blocks ahead (e.g. ten blocks).
This automatic prize generation may give an incentive for the casual miner not to include so many transactions, since a fixed reward (higher than the transaction fees) may exist. But since including transactions in a block requires very little resources, here is no reason not to include all known transaction and collect all possible fees. For the miners who have a high percentage of network computing power (like mining pools) obviously no such incentive exists, since including less transaction imply being awarded less money as prices in following mined blocks.

Anyone would like to write a book with the discussions of these threads? I imagine the book be called  something like
"Agreement without Trust, Inside the Bitcoin P2P community" (by P2PMaster, 2013) 0.99 BTC, paperback.

[da2ce7]

While I believe that insurance based network security services would naturally keep the network secure (while using the minimal amount of work).

I general fall-in and agree with gmaxwell that this is a core economic rule, and should not be changed. (just like any other of bitcoin's economic rules, such as the block-reward).

I also think that it is a non-issue. As one day solutions such as Open Transactions will provide secure off-chain transactions.  (and in the future we see Bitcoin transactions for the settlement between OT servers and issuers.)

[MPOE-PR]

I also think that it is a non-issue. As one day solutions such as Open Transactions will provide secure off-chain transactions.  (and in the future we see Bitcoin transactions for the settlement between OT servers and issuers.)

For the record, MPEx's off chain transaction system (the PUSH commands) is already moving more value daily than any of the alt chains, and possibly more than all the altchains combined (course it's mostly LTC and NMC that have any value to speak of as it is).

[justusranvier]

I general fall-in and agree with gmaxwell that this is a core economic rule, and should not be changed. (just like any other of bitcoin's economic rules, such as the block-reward).

The first successful 51% attack is going to be a company who wants to use Bitcoin to get some real work done, but discovers a vocal group of miners who dream of being the next Goldman Sachs blocking them with silly size restrictions on the block chain.

That company will dig through its couch cushions and find a billion dollars per year to experiment with and will successfully out-mine the rest of the network, placing more commerce-friendly rules in play and displacing everyone who came before.

Unless the network makes the changes ahead of time.

[MPOE-PR]

I general fall-in and agree with gmaxwell that this is a core economic rule, and should not be changed. (just like any other of bitcoin's economic rules, such as the block-reward).

The first successful 51% attack is going to be a company who wants to use Bitcoin to get some real work done, but discovers a vocal group of miners who dream of being the next Goldman Sachs blocking them with silly size restrictions on the block chain.

That company will dig through its couch cushions and find a billion dollars per year to experiment with and will successfully out-mine the rest of the network, placing more commerce-friendly rules in play and displacing everyone who came before.

Unless the network makes the changes ahead of time.

And you know this because why?

MPEx is the real company getting real work done. No need to 51% the network (yet).

[justusranvier]

MPEx may be a big fish, but  bitcoin as a whole is a very small pond presently.

[MPOE-PR]

MPEx may be a big fish, but  bitcoin as a whole is a very small pond presently.

No argument there. At issue is the blind conviction of most everyone that Bitcoin has to be a sort of universal payment processor directly (possibly because all the payments these people ever engage in are to the tune of ten bucks).

In fact consumer level transactions, those five dollars for a moccachino, those nineteen dollars for a new pair of socks, those three hundred dollars for a new set of dildos and handcuffs constitute an area where Bitcoin's advantages are significantly dimmed (not reversible?! ouch), Bitcoin's disadvantages significantly magnified (wait up to six hours for a transaction to clear?! srsly!?), and currently existing infrastructure is well adapted (hey, Visa already does a billion transactions a week, why bother to put all the hard work into supplanting them? Why replace all the billion piece-of-shit point of sale units they already have on field? Guess what, they're not pieces of shit because corporations are evil, they're pieces of shit because when you do retail and interact with consumers you have to REALLY keep costs down).

Bitcoin's advantages shine at the other end of the spectrum. If I have to pay my Chinese suppliers for eight containers of socks or dildos or handcuffs or whatever else, I currently have to wait for a month or more just to obtain some bank's permission. The system of handling large payments is so complex, so risky, inefficient, and so downright insulting to the customer that I couldn't begin to tell you. That's where Bitcoin's advantages really matter, and as long as we gain market share there it makes absolutely zero difference if fifty or fifty million coffee shops start taking or stop taking Bitcoin. It may be a fact that mostly nobody currently involved with Bitcoin has ever paid for anything outside of retail channels. That happenstance doesn't make retail the only thing that exists.

I know that most everyone would like Bitcoin to be a currency for the masses, because most everyone actually is the masses. This still has no bearing, much like the case of the duckling that sat on a dragon egg. You can't expect the dragon to be sitting around the pond playing with your duckling friends, now can you? It's a dragon, it has dragony shit to do!

Store of value? Great, sure, forever. Ultimate unit of account, gateway to real finance as opposed to the wrestling show put up by Wall Street? Sure. Payment processor? Sure, if you're buying a plane. If you're buying a cup of coffee enjoy it while it lasts, but don't expect it to last forever. It just makes no sense to buy your cup of coffee in Bitcoin (tho it may make sense to buy a Bitcoin's worth of store tokens once a month, and from there on the gate is wide open to Bitcoin-based payments, using bitcoin-backed private currencies, such as United States Dollars, Unified Store Dingdongs or Universal Spurious Dobaloos. It's just that they won't be put through the blockchain, because there's no need to put them though the blockchain and no benefit to doing so.)