Fundamental bitcoin flaw - revisited

[beeblebrox]

The TOTAL of all fees (not just Sastohi) for the last 24hrs (according to http://blockchain.info/stats) was 51BTC which gives an average of 0.012BTC/block that at the current exchage rate is about $0.5/block.  Do you really think that that is enough to secure the network?

Wow, the miners are only making less than $2,000 a day from TX fees. I'll be honest, that is a bit too low isn't it? How many miners are there? Over 10,000? So that is maybe $5 a day average per miner if my guess is right. Its not above electricity cost is it? or just barely.

You do make an interesting point beeblebrox.

I did make a couple of points a few pages back but you didn't reply, I would be interested what you thought of that?

Cheers.

It's worse than that,  you're math is a bit wrong:  $2,000/10,000 = $0.20  
(assuming 10,000 miners of course. I don't think there are that many personally-- but I know nothing about the numbers involved its just a gut feeling-- the pool operators could give you  better info on this)

[ancore]

wow now you are saying we could have such a system soon? say 10 years

if http://blockchain.info/charts/cost-per-transaction is accurate
a cost of $2.50 is way better than the price banks are asking you to do for an international wire (I know you can't transact billions of dollars worth with bitcoin yet, but consider small transactions)
think of bitcoin as a way to go between different currencies

In Europe you have bitcoin-central, I can buy bitcoins at market price at a 0.5% fee (SEPA transfers are free if you already have a bank account in in the SEPA zone)
and sent them to Argentina and get pesos for them at the blue market rate, goes to show people in Argentina trust the blockchain (last I checked official price was 6 pesos for a dollar, blue price 9 pesos)

not only do I get to circumvent the heavy restrictions, it's also cheaper

do you really think people in Argentina will have safe computers in the next 10 years?

Argentina is just an example, do you really think we will have safe computing in the whole world available for the foreseeable future?

[flipperfish]

1) Coin creation:
a)Firstly, Sally secure boots her computer.

Stopped reading here: Why would Sally be interested in secure booting her computer, if she later wants to scam Ross?

Well, if you read and understood it then you would know that she *has* to boot securely if she wants to transact with Ross.  Ross's computer demands that Sally's computer proves that it has booted securely (this is known as remote attestation)

The rest of your scheme (okay, I admit, I read it after all) describes a way, which ensures that no 3rd party can tamper with the transaction, but that's not the problem here. The problem is, that Ross has to trust Sally.

No, that's incorrect. Ross doesn't trust Sally.  He trusts Sally's computer and that the computer's TC chip hasn't been compromised.

OMG, I see now, you really do propose a world, in which every computer is manufactured by apple or microsoft or some other huge company, and includes a chip, which makes sure you don't have any control about your computer. This basically means, that Sally and Ross will have to trust the huge company in this case, which essentially boils down to the central banking we have now. Only difference: You don't only have to trust the central entitiy with your money, but also with your information and everything else your computer has access to. Thanks, I think I'll stay with central banks, then.  

Even if you use a dedicated computer for DRM Coins, Sally and Ross still will have to trust the manufacturer of the dedicated computer / DRM to not steal their coins. This doesn't even need to be an obvious attack, but could also be executed by Sally, who works for the manufacturer of the dedicated computer / DRM and thus knows the secret keys.

Every DRM Scheme somewhere has its root keys, whose owner you have to trust. There are no root-keys for the blockchain.

[Ichthyo]

Hopefully you people will begin to realise that off-chain transactions are going to be very popular and it is a real threat to bitcoin.

Again, where is your argument, dude?

Why are off-chain transactions necessarily bound to be very propular?? Why is that popularity necessarily and inevitably bound to be a thread to Bitcoin?

I've actually made the argument a few times.  It's just basic human preference.  Off-chain transactions are cheaper than on-chain ones.  They are faster.  Some mechanisms do not leave public trails of previous ownership.
Since they have these advantages over on-chain ones and the fact that these  are commonly wanted properties of a transaction people will choose off-chain in preference to on-chain.

Hey Boy, are you so dull or do you want to troll?

WHERE IS YOUR ARGUMENT


You state all the time: Off-chain transactions are cheaper. WHERE IS YOUR PROOF? That is what you have to show and to proof. Just claiming that something is magically cheap or even "totally free" doesn't count as argument.

Secondly, you state all the time, that this will have necessarily the consequence of people neccessarily abusing the blockchain, i.e. taking value from the blockchain, without paying enough for securing it.

ALSO THIS HAS TO BE PROOVEN, not just claimed

Please realise that your brilliant finiding as a crucial omission or gap in the argumentation chain here. And please don't be so self-complacent in your whole conduct. A lot of people have taken your confused argument serious and tried to find some good points in it.

To spell it out in single points for you. beeblebrox you have the duty to treat the following points, to support your claimed "fault" in Bitcoin:

• first, provide a proof that a service interlinked with Bitcoin is actually taking away value from the bitcoin service, not just co-existing and competing with it
• second, provide a proof that the existence of an off-chain service necessarily has the consequence to cause the above, and will do so to a significant amount
• third, provide a proof that a locked-in, gated system based on TPM and DRM, but interlinked with Bitcoin
  
  • 3.a) can even be constructed;  the security, the actual operation and the economical side this anything but obvious or trivial. You have to show this.
  • 3.b) in this form which can be implemented, is actually cheaper than the service provided by Bitcoin
  You need to look at the total cost of usage here.
  

If you fail to prove any of these, all of your ingenious finding just collapses.

Just the fact that there is another method of exchanging money aside of Bitcoin does NOT imply that people are abusing the service of Bitcoin without paying for it. It just means that there is a competitor, nothing more.

Take for example the Mt.Gox redeemable vouchers.
Is ist a flaw in bitcoin that people can exchange value by using Mt.Gox vouchers? Does it take value away from the Bitcoin network, without paying back? And special bonus question: who pays for Mt.Gox redeemable vouchers? Are they free?

[Ichthyo]

OMG, I see now, you really do propose a world, in which every computer is manufactured by apple or microsoft or some other huge company, and includes a chip, which makes sure you don't have any control about your computer.

plus beeblebrox thinks it is outright obvious, that you can "just write some software" for such a system, and on top of that, providing such a software would be "totally free"

Even if you use a dedicated computer for DRM Coins, Sally and Ross still will have to trust the manufacturer of the dedicated computer / DRM to not steal their coins. This doesn't even need to be an obvious attack, but could also be executed by Sally, who works for the manufacturer of the dedicated computer / DRM and thus knows the secret keys.

Every DRM Scheme somewhere has its root keys, whose owner you have to trust. There are no root-keys for the blockchain.

And its not only the root keys, it is every step in between where the bitcoin private key is possibly at stake. Every single point of attack at every intermediary exchage step would allow an attacker to redeem the value on the real block chain.

[beeblebrox]

Hopefully you people will begin to realise that off-chain transactions are going to be very popular and it is a real threat to bitcoin.

Again, where is your argument, dude?

Why are off-chain transactions necessarily bound to be very propular?? Why is that popularity necessarily and inevitably bound to be a thread to Bitcoin?

I've actually made the argument a few times.  It's just basic human preference.  Off-chain transactions are cheaper than on-chain ones.  They are faster.  Some mechanisms do not leave public trails of previous ownership.
Since they have these advantages over on-chain ones and the fact that these  are commonly wanted properties of a transaction people will choose off-chain in preference to on-chain.

Hey Boy, are you so dull or do you want to troll?

WHERE IS YOUR ARGUMENT


You state all the time: Off-chain transactions are cheaper. WHERE IS YOUR PROOF? That is what you have to show and to proof. Just claiming that something is magically cheap or even "totally free" doesn't count as argument.

Here is the proof:
step 1) buy a casascius coin
step 2) give it to somebody

[ancore]

proof is not an ARGUMENT

[stillfire]

Here is the proof:
step 1) buy a casascius coin
step 2) give it to somebody

Ah you mean buy a coin which A) costs more than the equivalent BTC value and B) is not internet enabled?

How is this different from just buying a gold coin for your BTC? As a matter of fact you could trade it back for BTC in the future, allowing a form of off-chain transactions.

This thread has a certain circular feel to it.

[twolifeinexile]

Hopefully you people will begin to realise that off-chain transactions are going to be very popular and it is a real threat to bitcoin.

Again, where is your argument, dude?

Why are off-chain transactions necessarily bound to be very propular?? Why is that popularity necessarily and inevitably bound to be a thread to Bitcoin?

I've actually made the argument a few times.  It's just basic human preference.  Off-chain transactions are cheaper than on-chain ones.  They are faster.  Some mechanisms do not leave public trails of previous ownership.
Since they have these advantages over on-chain ones and the fact that these  are commonly wanted properties of a transaction people will choose off-chain in preference to on-chain.  

The only negative that anyone has so far given of off-chain is that it is less secure than on-chain.  However, in the case of DRM coin the truth of the matter is that for majority of day-to-day transactions it is good enough-- this is demonstrated by actual real-life practice today: ie, Consumers do use smart cards to buy stuff and very, very rarely complain about the want of security involved.  Smard cards are secured by the same type of technology has DRM (infact you could use smart cards to implement DRM coin).  In my home city I use a smart card every time I use the local transport system-- and so do 100's of 1000's of people everyday.  This demonstates that for small transactions (say less than $250) smartcard is good enough.  For larger transactions you can use more traditional banking systems (eg: similar to how gold is bought or sold-- the gold stays where it is in a vault but a record of what is bought or sold is recorded by the various banks involved.)  Not many people complain about the security of regulated banks: it is very,very rare for someone to be personally out of pocket due to a breach of bank security. When was the last time you heard of some having their money stolen from/by a bank and not being set-right again by the bank or the Government?  If banks that trade gold/cash etc, can handle their security so well why do you think they wouldn't be able to do the same with bitcoin?  Bank transfers of large amounts of bitcoin in this way would be very cheap, the bitcoin network simply couldn't compete with it!

Up to now you have given us very little to take you seriously.
Your point boils down to criticising Bitcoin for being open and extensible, and able to be connected with other economic structures (like off-chain transactions). You say this is a "flaw" in Bitcoin. And, following your line of thought, to repair this flaw, Bitcoin should be locked down and gated, otherwise it could not withstand the competition of TC, DRM and similar gated systems.

Not quite.  My point is that bitcoin as-is with the transaction fees model will not be able to maintain network security due to the fact that you can do off-chain transactions.  My personal perferred solution to this problem is to change the bitcoin protocol so that miners make money by both transaction fees and by reclaiming old-untouched coin.  I actually like the idea that you can do off-chain transactions and believe it is the best way forward since it reduces block size.  I definitely do not want it locked down and gated.  If you read the OP you would know this.  (In the OP I also give other possible solutions to the problem).

youcan try some alternative chains that fit your sense of security, if that is the right way you belive will succeed, you can gain much by jumping to the right alternative chain now.

[Sukrim]

Prepare your oscilloscopes in that case!
MintChip 2.0 all the way!

If DRMcoin would be so trusted, there would be no need for Bitcoin in the first place by the way, as one could transfer fiat or other amounts (gold) securely that way. No need for elaborate mining schemes or an expensive global ledger...

To have an overview on how "secure" DRM systems with smartcards are, just look at the fees of existing payment processors (Mastercard, Visa...) - the current implementation of DRMcoins.

[colour]

I don't know if it has been mentioned yet, but if off-blockchain tx become so popular that they endanger the security, then all businesses who are involved in off-chain tx will basically be forced to invest into increased security themselves, perhaps by paying miners directly or by making nonsense-tx with high fees to attract miners.

Otherwise, their whole business would fail if the core Bitcoin system itself fails. They would basically have to decide between no more profits (due to breakdown of the Bitcoin system because of a lack of sufficient fees) or reduced profits (by ensuring the security of the network with their own investments). I am sure that all involved in such business would chose less profit over no profit anytime.

I think it could turn out to be a self-regulating system, basically. Or maybe not, for me Bitcoin is foremost a very interesting experiment, and I am sure we will have learned a lot even if it fails.

[beeblebrox]

I don't know if it has been mentioned yet, but if off-blockchain tx become so popular that they endanger the security, then all businesses who are involved in off-chain tx will basically be forced to invest into increased security themselves, perhaps by paying miners directly or by making nonsense-tx with high fees to attract miners.

Otherwise, their whole business would fail if the core Bitcoin system itself fails. They would basically have to decide between no more profits (due to breakdown of the Bitcoin system because of a lack of sufficient fees) or reduced profits (by ensuring the security of the network with their own investments). I am sure that all involved in such business would chose less profit over no profit anytime.

I think it could turn out to be a self-regulating system, basically. Or maybe not, for me Bitcoin is foremost a very interesting experiment, and I am sure we will have learned a lot even if it fails.

Generally, schemes where people have to voluntarily contribute to maintain a public good don't work very well in practice.
The solution you've proposed would most likely fail since each individual concludes that they themselves needn't contribute (ie: voluntarily pay FEES) because the rest of the users will and the loss of their small contribution won't be noticed.  The most common real life solution to prevent these kinds of tragedies is to police/enforce the contribution and make it non-voluntary -- hence why it is illegal not to pay your tax contribution or why there are parking fines for exceeding free car parking time limits.  

This is why I personally believe that if bitcoin was better-thought-out at the start it, would have been preferable to have implemented a dead-coin sweep since it forces people to make regular fee-paying transactions or suffer a penalty.

[beeblebrox]

I don't know if it has been mentioned yet, but if off-blockchain tx become so popular that they endanger the security, then all businesses who are involved in off-chain tx will basically be forced to invest into increased security themselves, perhaps by paying miners directly or by making nonsense-tx with high fees to attract miners.

Otherwise, their whole business would fail if the core Bitcoin system itself fails. They would basically have to decide between no more profits (due to breakdown of the Bitcoin system because of a lack of sufficient fees) or reduced profits (by ensuring the security of the network with their own investments). I am sure that all involved in such business would chose less profit over no profit anytime.

I think it could turn out to be a self-regulating system, basically. Or maybe not, for me Bitcoin is foremost a very interesting experiment, and I am sure we will have learned a lot even if it fails.

Generally, schemes where people have to voluntarily contribute to maintain a public good don't work very well in practice.
The solution you've proposed would most likely fail since each individual concludes that they themselves needn't contribute (ie: voluntarily pay FEES) because the rest of the users will and the loss of their small contribution won't be noticed.  The most common real life solution to prevent these kinds of tragedies is to police/enforce the contribution and make it non-voluntary -- hence why it is illegal not to pay your tax contribution or why there are parking fines for exceeding free car parking time limits.  

This is why I personally believe that if bitcoin was better-thought-out at the start it, would have been preferable to have implemented a dead-coin sweep since it forces people to make regular fee-paying transactions or suffer a penalty.

I should also point out that once people see other people not contribute they themselves feel that they don't need to either cause they ask themselves "why should I pay when this other guy doesn't".  This quickly escalates and downward spirals until no-one's paying.

[conv3rsion]

https://gist.github.com/gavinandresen/2961409

man, I am thankful everyday for Gavin.

[beeblebrox]

https://gist.github.com/gavinandresen/2961409

man, I am thankful everyday for Gavin.

Just had a skim read of this.  It does nothing to address the issue I've raised, it deals with another major problem with transaction fees.

[beeblebrox]

https://gist.github.com/gavinandresen/2961409

man, I am thankful everyday for Gavin.

Just had a skim read of this.  It does nothing to address the issue I've raised, it deals with another major problem with transaction fees.

This thread debunks your concerns pretty thoroughly. If you're so worried, maybe you should actually read and try to understand the replies instead of acting like you're so much smarter than everyone else and harping on like a broken record?

I have read and understood.  So far the only two arguments that you people have used to defend bitcoin with is
1) that people will voluntarily make personal sacrifices to secure the network if transaction fees dropped significantly-- which I disagree with because of my own experience gained by observing human behaviour over 40+ years.
2) that people will make transactions on chain instead of off-chain becuase they will only accept the level of trust which bitcoin on-chain offers and no-other.  This is debunked by the fact that most people here trust the exchanges-- which have a shocking track record, are run by people little more than amateures, are not regulated nor audited according to the any real standard and exist predominately in foreign countries.  If trust was such an issue, how do the exchanges manage to exist at all?