Bitcoin: The Digital Kill Switch

[AnonyMint]

http://market-ticker.org/akcs-www?post=219284

1. Karl asserts Bitcoin's future money supply is asymptotically ZERO (0). I agree:

Bitcoin exhibits irreversible entropy.  A coin that is "lost", that is, which the current possessor loses control over either by physically losing their wallet or the key to it, can never be recovered.

[...]

It certainly is something that those who tout the currency think is good for the value of what they hold, but the irreversible loss of value can also easily lead people to abandon the use of the currency in which case its utility value to express goods and service preference is damaged, quite-possibly to the point of revulsion.

This is not true, incidentally, for something like a gold coin.  The coin can be lost or stolen but unless it's lost over the side of a boat at irretrievable depth it can be recovered and the person who recovers it can spend it.  What constitutes "irretrievable depth" has a great deal to do with exactly how many coins might be there too

2. Karl asserts Seniorage is not a get-rich proposition (early adopters profiting), rather a responsibility to withdraw it when the economy is contracting, else the state can withdraw it, because society will demand it. I don't agree with this assertion that the government should increase the value of money during production contraction (so as to avoid rising prices) by removing currency. Let the market solve this, those what have capital can invest in production. I think seniorage should be distributed proportional to those who have the most capital, because they have demonstrated they know how to invest and increase production, but they shouldn't collect an interest for loaning and simultaneously receive the seniorage-- they have to choose (mining or loaning or investment in other production).

I mentioned above about fiat currencies being able to be issued and withdrawn.  There is often much hay made about the principle of seigniorage, which is the term for the "from thin air" creation of value that a state actor obtains in creating tokens of money.  Seigniorage is simply the difference in represented value between the cost of emitting the token (in the case of paper money, the paper, security features and ink) and the "value" represented in the market.  There is much outrage directed at the premise of fiat currency in this regard but nearly all of it is misplaced because people do not understand that in a just and proper currency system the benefit of seigniorage comes with the responsibility for it as well, and it is supposed to be bi-directional.

That is, in order for time preference to be neutrally expressed, less the natural deflationary tendency from productivity improvement, the government entity issuing currency gets the benefit of seigniorage when the economy is expanding.  But -- during times of economic contraction they also get the duty to withdraw currency (or credit) so as to maintain the same balance, as otherwise the consequence is inflation -- that is, a generalized rise in the price level and the destruction of the common person's purchasing power.

That this is honored in the breach rather than the observance does not change how these functions are supposed to work, any more than the fact that we have bank robbers means we shouldn't have banks.  This, fundamentally, is why currency schemes like Bitcoin will never replace a properly functioning national currency and are always at risk of becoming worthless without warning should such a currency system arise, even ignoring the potential for legal (or extra-legal) attack.

Simply put there is no obligation to go along with the privilege that the originators of a crypto-currency scheme have left for themselves -- the ability to profit without effort by the future efforts of others who engage in the mining of coins.

3. Karl asserts currency should appreciate relative to productivity increases, but be constant otherwise. I think it an impossible goal because it is impossible to measure the price level in an economy because goods & services change. Also I don't think old capital should be rewarded for being idle forever, thus a small debasement encourages capital to not become too stale. Gold's 2.5% may be a good balance.

Time preference is the ability to choose to perform a service or sell a good now but obtain and consume the other part of the transaction for yourself later.  With a perfect currency time preference has no finger on the scale; that is, the currency neither appreciates or depreciates over time against a reasonably-constant basket of goods and services.  Since technological advancement tends to make it easier to produce "things" in real terms, a perfect currency reflects this and makes time preference inherently valuable.  This in turn forces the producers of goods and services to innovate in order to attract your economic surplus from under the mattress and into their cash registers, since not spending your economic surplus is in fact to your advantage.  Today's fiat currencies intentionally violate the natural time preference of increasing productivity, but even yesterday's metallic standards did a poor job of representing it.  The problem here is the State, which always seeks (like most people) to get something for nothing and what it winds up doing instead (since getting something for nothing is impossible) is effectively stealing.

4. Karl asserts digital currencies are not stateless, and users doing acts of evasion will suffer (including not reporting capital gains on all transactions). I agree this is coming later, if the government can trace your transactions.

Those who are using Bitcoin as a means to try to foil currency controls or state prohibitions on certain transactions are asking for a criminal indictment not only for the original evasion act itself but also the possibility of a money-laundering indictment on top of it, and the proof necessary to hang you in a court of law is inherently present in the design of the currency system!

Here the fundamental problem of wide acceptance comes into view.  This is the problem that the proponents of the system are most-able to address through various promotional activities.  Unfortunately it also leads to deception -- either by omission or commission -- of the flaw just discussed.  To the extent that the popularity of the currency is driven by a desire to "escape" state control promotion of that currency on those grounds when in fact you are more likely to get caught (and irrefutably so!) than using conventional banknotes is an active fraud perpetrated upon those who are insufficiently aware of how a cryptocurrency works.

5. Karl points out that Bitcoin's transactions are slow. I agree this needs to be fixed.

Cryptocurrencies have a secondary problem in that because they are not self-validating there is a time delay between your proposed transaction using a given token and when you can know that the token is valid.  Bitcoin typically takes a few minutes (about 10) to gain reasonable certainty that a given token is good, but quite a bit longer (an hour or so) to know with reasonable certainty that it is good.  That is, it is computationally reasonable to believe after 10 minutes or so that the chain integrity you are relying on is good.  It approaches computational impracticality after about an hour that the chain is invalid.

This is not a problem where ordering of a good or service and fulfillment is separated by a reasonable amount of time, but for "point of transaction" situations it is a very serious problem.  If you wish to fill up your tank with gasoline, for example, few people are going to be willing to wait for 10 minutes, say much less an hour, before being permitted to pump the gas -- or drive off with it.  This makes such a currency severely handicapped for general transaction use in an economy, and that in turn damages goods and service preference -- the ability to use it to exchange one good or service for another.  What's worse is that as the volume of transactions and the widespread acceptance rises so does the value of someone tampering with the block chain and as such the amount of time you must wait to be reasonably secure against that risk goes up rather than down.

[mobodick]

4. Karl asserts digital currencies are not stateless, and users doing acts of evasion will suffer (including not reporting capital gains on all transactions). I agree this is coming later, if the government can trace your transactions.

Those who are using Bitcoin as a means to try to foil currency controls or state prohibitions on certain transactions are asking for a criminal indictment not only for the original evasion act itself but also the possibility of a money-laundering indictment on top of it, and the proof necessary to hang you in a court of law is inherently present in the design of the currency system!

Here the fundamental problem of wide acceptance comes into view.  This is the problem that the proponents of the system are most-able to address through various promotional activities.  Unfortunately it also leads to deception -- either by omission or commission -- of the flaw just discussed.  To the extent that the popularity of the currency is driven by a desire to "escape" state control promotion of that currency on those grounds when in fact you are more likely to get caught (and irrefutably so!) than using conventional banknotes is an active fraud perpetrated upon those who are insufficiently aware of how a cryptocurrency works.

The beauty of this is that all the money stream constructions of multinationals that are now used to evade taxes can be traced down.
I hope you understand that multinationals are taking money out of the economy constantly and stack that in banks of countries where they pay no taxes to society. They have removed 9/10 of the world currency but are unable to use it because that would mean they have to pay taxes. Meanwhile, on paper, they have a bad time and need to be saved.
The reason the US issues more dollars to be printed is because dollars are disapearing from society. The only way to maintain some sort of fluidity is to throw in money on the other side from where they are taken out.
Our world economy is powered by money put in by society on one end and taken out by corporations on the other.

Having everything proven in the blockchain will reveal these money streams and alow us to act on them.
This mechanism of proof wil be an enourmous tool for society for keeping large institutions in check.

[mobodick]

5. Karl points out that Bitcoin's transactions are slow. I agree this needs to be fixed.

Cryptocurrencies have a secondary problem in that because they are not self-validating there is a time delay between your proposed transaction using a given token and when you can know that the token is valid.  Bitcoin typically takes a few minutes (about 10) to gain reasonable certainty that a given token is good, but quite a bit longer (an hour or so) to know with reasonable certainty that it is good.  That is, it is computationally reasonable to believe after 10 minutes or so that the chain integrity you are relying on is good.  It approaches computational impracticality after about an hour that the chain is invalid.

This is not a problem where ordering of a good or service and fulfillment is separated by a reasonable amount of time, but for "point of transaction" situations it is a very serious problem.  If you wish to fill up your tank with gasoline, for example, few people are going to be willing to wait for 10 minutes, say much less an hour, before being permitted to pump the gas -- or drive off with it.  This makes such a currency severely handicapped for general transaction use in an economy, and that in turn damages goods and service preference -- the ability to use it to exchange one good or service for another.  What's worse is that as the volume of transactions and the widespread acceptance rises so does the value of someone tampering with the block chain and as such the amount of time you must wait to be reasonably secure against that risk goes up rather than down.

This can be fixed in society just as 'easily' as in bitcoin. The root of this problem is trust.
Bitcoin sidesteps trust by using a cryprographic rigor. But i can easily see that you can open an account with your gas provider that alows you to get a certain amount of gas without the immediate need to prove you will pay for it.
In fact, i have such a relation with my power company. I pay a steady amount per time unit for my power and once in a while the actual meter is checked and everything is recalculated on basis of that measurement. In the end it becomes a steady economic stream which is good as everyone knows what to expect of the (near) future.
Once bitcoin becomes so big that this realy starts to form a major problem you will find that there are many reasonable ways to fix these types of trust problems. Usually the transactions that require speed are the ones that transfer the least value.
I can even imagine a currency coming into existance to fill in this gap and act as the currency part for bitcoin. This coin would have a smaller blockchain and have a shorter acknowledge time from the network. And this would be justified because the value contents of individual transactions will be low.

For large transactions i would argue that speed is actually a bad thing.
Notice what happened when computers were alowed to fight over price at incredible speed with lots of capital. Speed is a destabilizing factor on those scales so it's actually better to have some energetic cost to transactions on these levels so they can change only slowly and only out of deliberation and not just in panic.

[mobodick]

3. Karl asserts currency should appreciate relative to productivity increases, but be constant otherwise. I think it an impossible goal because it is impossible to measure the price level in an economy because goods & services change. Also I don't think old capital should be rewarded for being idle forever, thus a small debasement encourages capital to not become too stale. Gold's 2.5% may be a good balance.

Time preference is the ability to choose to perform a service or sell a good now but obtain and consume the other part of the transaction for yourself later.  With a perfect currency time preference has no finger on the scale; that is, the currency neither appreciates or depreciates over time against a reasonably-constant basket of goods and services.  Since technological advancement tends to make it easier to produce "things" in real terms, a perfect currency reflects this and makes time preference inherently valuable.  This in turn forces the producers of goods and services to innovate in order to attract your economic surplus from under the mattress and into their cash registers, since not spending your economic surplus is in fact to your advantage.  Today's fiat currencies intentionally violate the natural time preference of increasing productivity, but even yesterday's metallic standards did a poor job of representing it.  The problem here is the State, which always seeks (like most people) to get something for nothing and what it winds up doing instead (since getting something for nothing is impossible) is effectively stealing.

Debasement certainly is a usefull tool for preventing the hogging capital.
But i feel it should scale with the power the capital represents in society.
So it should be increasingly hard to hoard more capital and should be basically free of debasement for low ammounts.

But this is a pretty pointless discussion because multinationals (the corporations ruling the world and causing most of these problems) just evade the whole thing by parking their profits in countries where such laws do not apply.
Ever noticed how some movies don't make a profit despite breaking all box office records?
The truth is they did make a very good profit, they just dont want to pay back society for creating this opprtunity for them.
So they move their profits to some bank through a construction and -poof- it's gone.

At the moment debasement only serves to keep everyone else out of the supranational playgrounds of the multinationals. It doesn't touch them.
So your idea would actually hurt society in general while not addressing the point that the problem that caused you to think of debasement as a solution has gone way out of hand already.
We need something completely different to even get started on retreiving all this value from these entities.

[mobodick]

2. Karl asserts Seniorage is not a get-rich proposition (early adopters profiting), rather a responsibility to withdraw it when the economy is contracting, else the state can withdraw it, because society will demand it. I don't agree with this assertion that the government should increase the value of money during production contraction (so as to avoid rising prices) by removing currency. Let the market solve this, those what have capital can invest in production. I think seniorage should be distributed proportional to those who have the most capital, because they have demonstrated they know how to invest and increase production, but they shouldn't collect an interest for loaning and simultaneously receive the seniorage-- they have to choose (mining or loaning or investment in other production).

I mentioned above about fiat currencies being able to be issued and withdrawn.  There is often much hay made about the principle of seigniorage, which is the term for the "from thin air" creation of value that a state actor obtains in creating tokens of money.  Seigniorage is simply the difference in represented value between the cost of emitting the token (in the case of paper money, the paper, security features and ink) and the "value" represented in the market.  There is much outrage directed at the premise of fiat currency in this regard but nearly all of it is misplaced because people do not understand that in a just and proper currency system the benefit of seigniorage comes with the responsibility for it as well, and it is supposed to be bi-directional.

That is, in order for time preference to be neutrally expressed, less the natural deflationary tendency from productivity improvement, the government entity issuing currency gets the benefit of seigniorage when the economy is expanding.  But -- during times of economic contraction they also get the duty to withdraw currency (or credit) so as to maintain the same balance, as otherwise the consequence is inflation -- that is, a generalized rise in the price level and the destruction of the common person's purchasing power.

That this is honored in the breach rather than the observance does not change how these functions are supposed to work, any more than the fact that we have bank robbers means we shouldn't have banks.  This, fundamentally, is why currency schemes like Bitcoin will never replace a properly functioning national currency and are always at risk of becoming worthless without warning should such a currency system arise, even ignoring the potential for legal (or extra-legal) attack.

Simply put there is no obligation to go along with the privilege that the originators of a crypto-currency scheme have left for themselves -- the ability to profit without effort by the future efforts of others who engage in the mining of coins.

I think your idea of distributing seigniorage proportionally to capital is flawed because capital can be gathered through corrosive means. A good way of gaining capital is not nessesarily a good or stable mechanism for society. So i dont think capital alone is a good indicatior for how usefull an entity is to society and should not be a base for any reward from society. The capital alone and the power it brings should be enough and is probably already too much.
You see, people have weaknesses that can be easily abused.
Imagine a pharmacorp that invents a medicine that hooks everyone. You don't have to buy it, but if you do you're prety much hooked for life. They can build up capital pretty effectvely from all the junkies they created. A whole industry can be created around the use of this substance. Even better, the junkies will do the hard part of the actuall robbing of society. Meanwhile the pharmacorp cashes in on the junkies. It's a booming business.
Do we want to give these organisations incentive to make more capital so they can get an even better position in society by eating it up? I don't think so.

I agree that a distribution of seigniorage could be beneficial to some point.
I just feel there must be a better way to assess usefullness to society than capital alone.
And i also feel that governments or government-like structures should always keep the better part of it under their control to assure the existance of certain institutions. No other party within society should be able to compete with the government on some terrains.

[mobodick]

1. Karl asserts Bitcoin's future money supply is asymptotically ZERO (0). I agree:

Bitcoin exhibits irreversible entropy.  A coin that is "lost", that is, which the current possessor loses control over either by physically losing their wallet or the key to it, can never be recovered.

[...]

It certainly is something that those who tout the currency think is good for the value of what they hold, but the irreversible loss of value can also easily lead people to abandon the use of the currency in which case its utility value to express goods and service preference is damaged, quite-possibly to the point of revulsion.

This is not true, incidentally, for something like a gold coin.  The coin can be lost or stolen but unless it's lost over the side of a boat at irretrievable depth it can be recovered and the person who recovers it can spend it.  What constitutes "irretrievable depth" has a great deal to do with exactly how many coins might be there too

May be, but you'll have to be pretty ingenious to lose 2x10^15 satoshi.

[AnonyMint]

4. Karl asserts digital currencies are not stateless, and users doing acts of evasion will suffer (including not reporting capital gains on all transactions). I agree this is coming later, if the government can trace your transactions.

The beauty of this is that all the money stream constructions of multinationals that are now used to evade taxes can be traced down.

[...]

Having everything proven in the blockchain will reveal these money streams and alow us to act on them.
This mechanism of proof wil be an enourmous tool for society for keeping large institutions in check.

No it will be used asymmetrically against the citizens because the government is already asserting its asymmetric power:

http://esr.ibiblio.org/?p=4867&cpage=1#comment-397607

(read the 4 posts by JustSaying (me) forward from the above linked one)

Don't miss the conclusion of that discussion:

http://esr.ibiblio.org/?p=4867&cpage=1#comment-397620

If you take away the collective’s power to print money, confiscate, and tax, the whole threat will crumble like the Berlin wall. I am working on it now. I’ve got a name now DURACASH.

5. Karl points out that Bitcoin's transactions are slow. I agree this needs to be fixed.

This can be fixed in society just as 'easily' as in bitcoin. The root of this problem is trust.
Bitcoin sidesteps trust by using a cryprographic rigor. But i can easily see that you can open an account with your gas provider that alows you to get a certain amount of gas without the immediate need to prove you will pay for it.
In fact, i have such a relation with my power company. I pay a steady amount per time unit for my power and once in a while the actual meter is checked and everything is recalculated on basis of that measurement. In the end it becomes a steady economic stream which is good as everyone knows what to expect of the (near) future.

I have already presented a technical fix for DURACASH which enables instant insured transactions and avoids all the meta-trust overhead noise that you say Bitcoin needs. Tada!

[AnonyMint]

2. Karl asserts Seniorage is not a get-rich proposition (early adopters profiting), rather a responsibility to withdraw it when the economy is contracting, else the state can withdraw it, because society will demand it. I don't agree with this assertion that the government should increase the value of money during production contraction (so as to avoid rising prices) by removing currency. Let the market solve this, those what have capital can invest in production. I think seniorage should be distributed proportional to those who have the most capital, because they have demonstrated they know how to invest and increase production, but they shouldn't collect an interest for loaning and simultaneously receive the seniorage-- they have to choose (mining or loaning or investment in other production).

I think your idea of distributing seigniorage proportionally to capital is flawed because capital can be gathered through corrosive means. A good way of gaining capital is not nessesarily a good or stable mechanism for society. So i dont think capital alone is a good indicatior for how usefull an entity is to society and should not be a base for any reward from society. The capital alone and the power it brings should be enough and is probably already too much.

And Bitcoin's distribution of the world's future money supply to early adopters is superior? As if those early adopters who knew how to mine were more important to society than everything else going on in the world.  

Rather we should reward early-adopters, but also debase them at a very slow 2.5% per annum over the long-term, so they can't hold the world enslaved just for one correct opportunity cost decision they made 100 to 1000 years before.

I just feel there must be a better way to assess usefullness to society than capital alone.

And precisely what would that metric be?

I am offering hard-disk space, so at least it is capital that most people already have to contribute, so we don't waste pre-existing and well distributed capital.

1. Karl asserts Bitcoin's future money supply is asymptotically ZERO (0). I agree:

May be, but you'll have to be pretty ingenious to lose 2x10^15 satoshi.

You missed the point. Over time coins are lost, that is unarguable. Thus at some point in the distant future, there will be 0 coins. That is unarguable. It might take a 50 years or a million years (we can't know because we can't differentiate hoarding from lost so we don't know the rate), but the statement "asymptotically ZERO" is mathematically unarguable.

Not knowing the rate of loss is very dangerous for adopting a currency. Bitcoin has no mechanism of debasement to counteract it.

[TiagoTiago]

...

I think your idea of distributing seigniorage proportionally to capital is flawed because capital can be gathered through corrosive means. A good way of gaining capital is not nessesarily a good or stable mechanism for society. So i dont think capital alone is a good indicatior for how usefull an entity is to society and should not be a base for any reward from society. The capital alone and the power it brings should be enough and is probably already too much.
You see, people have weaknesses that can be easily abused.
Imagine a pharmacorp that invents a medicine that hooks everyone. You don't have to buy it, but if you do you're prety much hooked for life. They can build up capital pretty effectvely from all the junkies they created. A whole industry can be created around the use of this substance. Even better, the junkies will do the hard part of the actuall robbing of society. Meanwhile the pharmacorp cashes in on the junkies. It's a booming business.

...

That has already happened with alcohol and tobacco, and arguably with caffeine and processed sugar/high fructose corn syrup.

[AnonyMint]

...

You see, people have weaknesses that can be easily abused.
Imagine a pharmacorp that invents a medicine that hooks everyone. You don't have to buy it, but if you do you're prety much hooked for life. They can build up capital pretty effectvely from all the junkies they created. A whole industry can be created around the use of this substance. Even better, the junkies will do the hard part of the actuall robbing of society. Meanwhile the pharmacorp cashes in on the junkies. It's a booming business.

...

That has already happened with alcohol and tobacco, and arguably with caffeine and processed sugar/high fructose corn syrup.

I agree with the above quoted portions. We must not give control of the capital to noobs in a way that they can be manipulated to corrupt the system.

The key to preventing the following quote, is to remove the ability of the collective to tax, confiscate, and abuse money so as to minimize their control over media and other means by which they can aggregate capital against humanity.

Also in my design for DURACASH, the debasement is only say 2.5% per year, so corrosive capital can't take more than 2.5% per year. Humanity's bursts of innovation and knowledge increases trump that 2.5%.

The cartel will be destoyed with DURACASH. I am perfecting the design which detaches the 51% attack from processing. The most they can steal is the 2.5% and even then it is a competitive race of capital, including the innovators who can aggregate capital at exponential rates, e.g. Google, Bitcoin creators, etc..

...

I think your idea of distributing seigniorage proportionally to capital is flawed because capital can be gathered through corrosive means. A good way of gaining capital is not nessesarily a good or stable mechanism for society. So i dont think capital alone is a good indicatior for how usefull an entity is to society and should not be a base for any reward from society. The capital alone and the power it brings should be enough and is probably already too much.

...

[mobodick]

...

I think your idea of distributing seigniorage proportionally to capital is flawed because capital can be gathered through corrosive means. A good way of gaining capital is not nessesarily a good or stable mechanism for society. So i dont think capital alone is a good indicatior for how usefull an entity is to society and should not be a base for any reward from society. The capital alone and the power it brings should be enough and is probably already too much.
You see, people have weaknesses that can be easily abused.
Imagine a pharmacorp that invents a medicine that hooks everyone. You don't have to buy it, but if you do you're prety much hooked for life. They can build up capital pretty effectvely from all the junkies they created. A whole industry can be created around the use of this substance. Even better, the junkies will do the hard part of the actuall robbing of society. Meanwhile the pharmacorp cashes in on the junkies. It's a booming business.

...

That has already happened with alcohol and tobacco, and arguably with caffeine and processed sugar/high fructose corn syrup.

Exactly. But i can see much more serious applications of science.
Aint no debasement gonna help against that.
I mean, how long will it be before a croporation can grow their own genetically modified slave race?
How long before your job is replaced by an AI?

[herzmeister]

Demurrage (Freigeld/Freicoin) and Inflation (debasement) have similar effect, but demurrage is better.

Workers would not have to renegotiate their salaries anew all the time.

The best would be if inflation rate could be tied to the GDP. But that's not so easily possible unless we can and want a totally computerized P2P economy.

But I believe since crypto-currencies are non-monopolistic, unregulated (free) currencies, the economic textbooks of yore don't apply anymore.

We'd have a rich eco-system of monetary and exchange systems.

In a truely freed market, that means also in a free currency market, there is no such thing as an inflationary currency or a deflationary currency.

Because there is no currency that will be regulated top-down. We're largely only familiar to planned monetary systems.

In actuality, the differences between currency, commodity, and asset would dissolve.

Once the demand for bitcoins has largely satisfied, they will have to compete with any other asset out there.

They will stop acting in a deflationary way when there are better stocks to invest in. People will put their money there then.

[AnonyMint]

I am thinking we really don't need the miners to process transactions. We only need them to create new coins and to keep a copy of the transactions that occurred independently of the P2P database.

You do realize exactly what the miners do, right?  They are not just out there playing the lotto.  They are performing vital duties with respect to verifying and validating the block chain.  That is what we are paying them for.

Yes of course. I am just thinking whether we can minimize what we need them for. I will need to think more deeply first, and then write it down more technically. I am not sure if what I wrote in the prior post will work. It was just off the top of my head.

My thought == we really only need the SINGLE block chain for the creation of coins.  After that, the BILLIONS of private key chains are sufficient independently. Tada!  I will explain more once I have thought it out more to make sure my initial intuition is correct.

Think of it like this, the creation of coins has to be agreed by everyone. The transfer of money only has to be agreed between payer and recipient. Just need a localized method of preventing double-spend instead of globalized, which I already offered.

The issue with this revolves around global time. I need to think about this more.

Okay I solved the key technical problem of consistent global time. This is simply a hash of each block in the chain. Each hash is a marker of relative global time. Really it doesn't need to be a hash, since the blocks will no longer contain transactions. It could just be any deterministic forward infinite series of numbers. Recursive hashes as a choice, adds a cost to targeting too far in the future.

(Side note, global hash time will be known before it happens, i.e. hash of prior hash is deterministically known a priori, so payers can send transactions that occur at known times in the future  )

So thus we don't need the mining peers to bundle the transactions into a block, in order to get collective agreement on when a transaction occurred. Instead, the payer need only include such a global hash in the payment sent, and then peers can independently save these, thus all peers agree on the "global hash time" the payment was sent.

If the payer sends a double-spend, the peers which have saved the prior conflicting spend will detect this, and we can choose our design whether to either ignore the double-spend or penalize it by confiscating the funds into the ether (lost forever). As I wrote earlier, we can have options for recipients to declare reserves so that payer has incentive not to attempt double-spend, as the reserve would be confiscated to the ether forever.

A double-spend can be achieved by getting peers to disagree about which transaction was sent first (due to network propagation order), if they are both marked with the same "global hash time". But I propose to penalize peers which refuse to mirror all transactions (exact mechanism described later), thus all peers will know there was double-spend. Again I propose the recipient can choose between waiting for sufficient time to be sure a double-spend is nearly impossible, or to attach a forfeitable reserve to insure the recipient will honor the transaction instantly.

The recipient will need to judge for himself (this will be a technology added on by third parties) what the risk factors are, e.g. if recipient can poll a significant proportion of the network for double-spend, then more probabilistic certainty sooner that the double-spend was not sent to any peer. The alternative is the forfeitable reserve optionally set by the recipient, which is unlocked from escrow back to the payer by the peers after the prescribed "global hash time" has been reached.

So therefor the block chain is no longer a block of transactions, but rather the collective agreement of the forward movement of time, and for doing this the mining peers are awarded new coins. Thus the 51% attack does not exist (or say it isn't a hard line in the sand between functioning and non-functioning system). And cartelization of the mining peers gains nothing except most of the new coins, which is only say 2.5% of per year of the money supply. Note the cartel could still make mining unprofitable by putting enough resources to bear that other miners did not get sufficient ROI for their contributed resources. Restoring debasement does not entirely eliminate the threat of monopolizing mining; rather only diminishes it (requires the cartel to need many more multiples of subsidy than otherwise).

Even if they have 99% the miners, they won't be able to block transactions entirely, and with the penalty for not mirroring transactions, the good peers will be evident to us. We can easily see who is doing mischief and route our transactions through peers we trust. In other words, the community has voting power over which peers to sort of ignore in real-time, without needing a fork. The most the bastards can do is get 2.5% per year.

Possibly we won't be keeping a history of transactions any more (although a peer could record this history), only the latest state of which public key owns which coins. I think we need the history to prevent rewriting history of who owns the money.

In theory, I've posit that I fixed the design of everything major that is wrong with Bitcoin (note my prior posts about improving anonymity).

P.S. The key flaw in my proposed hard-disk-space Proof-of-Work is how do we control the rate at which "block time" progresses? Even if all peers see that block time is going too fast, there is no mechanism to slow it down, since peers act selfishly to send their claim on the next block asap. So I may have to revert to CPU Proof-of-Work. Still thinking on this. Possibly we can require hard-disk work along with scrypt CPU work. Another solution is that if peers see block time is running too fast (outside the latency of network propagation), they can just refuse to accept new block time transmissions for a while. This would not stop transactions from processing. I think this might work.

Satoshi get off my lawn!

[AnonyMint]

I worked out the key aspect for implementing the more decentralized design of my prior post.

Any peer can post proof of a missing transaction, then all peers must come into alignment else their new coins will not be honored by all, because on the owner of the private key can create a transaction, so these can never be created by a rogue peer.

This will be enforced by requiring the peer whose turn is to be awarded new coins to send a hash of all transactions from some # of blocks prior (give time for transactions to propagate and settle into system-wide agreement). So peers who do not mirror all transactions will not have their new coins honored by the consensus of peers. Knowing the hash announced for a prior block time from the prior peer, won't help to avoid mirroring all transactions.

Double-spend propagation will be handled by a challenge-vote to determine if a double-spend came too late and is to be ignored. This replaces the role  of a race to produce the dominant block chain in Bitcoin.

The advantage of this design is that the 51% attack can't degrade the transactions of others. As long as there is one peer disagreeing with the other peers about an excluded transaction, then that transaction will be still be processed by the system.

So the threat of cartelization is drastically reduced. The cartel would need to control 100% of the peers, or nearly 100% of the peers and have enough control over the network to disrupt communications to the remaining peers.

I need to spend more time formally analyzing this design.

I am on vacation for a week or so, before I dive into this with complete focus.

herzmeister, I haven't had time to reply to you yet.

[Herbalconfusion]

So interested in where things will end up 1 year from now.

[btcminer021]

Loved the original article. Too much crap in the comments.

[Arcavum]

I hope someone creates a fork of Bitcoin that's not subject to gatekeepers or monopoly.  Then we can all flood there and leave Walmart, the abandoned leftovers.

The major flaw with Bitcoin is that it can *and in some cases* has to be translated to USD.  The currency should just stand on it's own and develop it's own separate economy.  The any privacy concerns would negligible.  The privacy is only effected if you try to convert your BTC.
*Which is the government panicking because they've lost control*

Remember, all governments need us to need them.  If we can function independently, then there's no need for government.  *The whole military/police argument is a sad excuse* Again, fear is just the government's way of manipulating us.

So, if Bitcoin functions independently, *Fuck the Dollar* then the government can't know who we are.  And in that regard, I think Bitcoin is far more valuable *function wise* and should be allowed to take it's natural role as defacto currency worldwide. 

I don't believe that privacy is violated converting other cryptocurrencies to bitcoin or vice versa.   This only applies to state sponsored money. *correct?*

[AnonyMint]

BurtW, I will.

Arcavum, I agree the separate economy and a more anonymous design, would be outside the purview of the state's power (hopefully, will learn more on the details as I go forward).

To all, I am not gone. Just taking a break to organize some life details before diving into this.

[mobodick]

I am thinking we really don't need the miners to process transactions. We only need them to create new coins and to keep a copy of the transactions that occurred independently of the P2P database.

You do realize exactly what the miners do, right?  They are not just out there playing the lotto.  They are performing vital duties with respect to verifying and validating the block chain.  That is what we are paying them for.

Yes of course. I am just thinking whether we can minimize what we need them for. I will need to think more deeply first, and then write it down more technically. I am not sure if what I wrote in the prior post will work. It was just off the top of my head.

My thought == we really only need the SINGLE block chain for the creation of coins.  After that, the BILLIONS of private key chains are sufficient independently. Tada!  I will explain more once I have thought it out more to make sure my initial intuition is correct.

Think of it like this, the creation of coins has to be agreed by everyone. The transfer of money only has to be agreed between payer and recipient. Just need a localized method of preventing double-spend instead of globalized, which I already offered.

The issue with this revolves around global time. I need to think about this more.

Okay I solved the key technical problem of consistent global time.

I don't think you did.
You propose to internalize any inconsistencies and imagine that a 3rd party will solve all the trust problem for you in some magical way.
Tada!...

But there are more flaws i guess.
You propose that a receiver can make the sender put money in a special box so that when he double spends he loses the money in the box.
But how do you make sure the coin in the box is not a double spent one? Well, of course you can put some money in a new box and when the coin in the first box turns out to be double spent then the coin in the second box goes -poof-.
But then what happens if the coin in the second box is double spent?
Recursiveness never solved anything.

There also seems to be a lot of potential for poisoning the process.
If rougue peers start spewing out false transactions and there is some latency in the time protocol you propose then that can put a lot of computational stress on the network. If these transactions will become part of the chain then we will need to deal with them for the rest of bitcoins life.
And even worse, if this time signal propagates too slowly you could actually create multiple valid transactions of the same coins. Then every single peer that deals with the chain will need to go over these relations to figure out if a transaction is valid. But how can you decide in any way which of the multiple transactions is the valid one?
The only way to correct double spendings with identical timestamps would be to stop all transactions untill the inconsistency becomes clear and all peers are up to date. Only then can you create a new timestamp that can be used for future transactions.
The thing is if you have the same coins spent on different things on different parts of the network but with the same timestamp the network cannot know which of the two transactions it needs to use for the creation of a new timestamp (your timestamps depend on previous transactions).
So to be able to create a new timestamp a client needs to be sure they have absolutely every transaction uptill now and that no other transactions occured in the mean time.

I dunno, maybe you need to explain it in more detail but it seems to me to lead to a huge tangled mess of subchains inside the block chain.

[mobodick]

I hope someone creates a fork of Bitcoin that's not subject to gatekeepers or monopoly.  Then we can all flood there and leave Walmart, the abandoned leftovers.

The major flaw with Bitcoin is that it can *and in some cases* has to be translated to USD.  The currency should just stand on it's own and develop it's own separate economy.  The any privacy concerns would negligible.  The privacy is only effected if you try to convert your BTC.
*Which is the government panicking because they've lost control*

Remember, all governments need us to need them.  If we can function independently, then there's no need for government.  *The whole military/police argument is a sad excuse* Again, fear is just the government's way of manipulating us.

So, if Bitcoin functions independently, *Fuck the Dollar* then the government can't know who we are.  And in that regard, I think Bitcoin is far more valuable *function wise* and should be allowed to take it's natural role as defacto currency worldwide. 

I don't believe that privacy is violated converting other cryptocurrencies to bitcoin or vice versa.   This only applies to state sponsored money. *correct?*

You don't seem to understand the basics of economics.
There is no way of preventing interactions between bitcoin and the rest of the world. The rest of te world includes things like the dollar and the euro. So there is no way to prevent interactions between bitcoin and dollar.
You cannot create a money system that cannot somehow be translated to another money system.

If you want bitcoin to be completely its own economy then you would need to start at the beginning.
You can hope all you want, but bitcoin is completely useless outside of the fiat economies. Try manufacturing a computer with bitcoins and you understand how dependent bitcoin is on the dollar.

If you think i'm wrong they you should stop using the fiat computer and the fiat internet that you obviously use and just make your own devices and network and pay for it completely in bitcoin.
You'll find out pretty quickly that its impossible.