Bitcoin trades the inequity of dynastic power for the inequity of early adoption

[Coincrazy]

I'm quoting this post because I'm worried you missed it the first time.

You wrote your post as if you were trying to make a rhetorical point.

The problem with proof-of-work is that in order to make the ledger impeachable, people need to throw real-world value into a hole.

It turns out this is no longer true. Keeping an impeachable ledger is pretty trivial. Lots of industries do it with much less computing power. Preserving the illusion that all that computing power is important, is the primary use of that computer power now.

The unfortunate result is that a lot of people early on in the project got a lot of coins...

The problem is not that they got "a lot of coins". The problem is that they got a large percentage out of a fixed set of coins. Had they gotten a large number of coins out of an unbounded set of coins there would be no problem at all.

So then... what? If this is a troubling result of the network rules, what rules would have worked better? How do you distribute newly created BTC in a "fair" way, when an anonymous system means that Sybil shenanigans are trivial? How do you incentivize mining, except via block rewards?

I'm sincerely interested in hearing your ideas.

Most of the "steady value" models involve generating and destroying coins on an as needed basis. None have been implemented yet (as far as I know) because there isn't a ground swell of interest in creating a currency in which the early adopters don't get rich.

However, for insights you might consider learning about Local Exchange Trading Systems.
http://en.wikipedia.org/wiki/Local_exchange_trading_system

Suppose Alice grows Apples, Bob grows Beans, and Charlie makes Cheese. But none of them have any money.
Now if Bob wants an Apple, but Alice doesn't want Beans, then in a LETS system they agree on a price $1 and Alice gives Bob an Apple. The transaction is accounted for using double entry book keeping. Alice + $1, Bob - $1. With LETS it is OK to have a negative balance (within limits)
Now Alice wants $1 worth of Cheese so Charlie gives it to her. Balances now are:
Alice = 0
Charley = +1
Bob = -1
Finally Charlie wants $1 from Bob so he gives them to him. That puts all balances back at zero again.
No currency exists at the moment, because no currency is needed.
When currency is needed again, it is simply created. A flexible currency supply is indeed a magical thing!

Compare that to Bitcoin.
Say I have a Ferrari and you want to buy my Ferrari but neither of us have Bitcoins.
It should be a transaction that only involves us, it shouldn't make anyone else richer. But with bitcoin, of course, it does.
How do we know how many Bitcoins is a Ferraris worth? Early adopters get to decide. Something about that seems fishy. :-)

This thread rocks

I liked most of your post red

However this LETS  system yiu talk about is counter party or central counter party based

Without that book keeper it will fail

Also people have to be some how accountable...else that guy who has a minus 1 can refuse to pay and scr3w the system

Bit coin doesn't believe in that central counter party or minus one ...so has an advantage

The biggest problem I see in the bit coin theory is that early adopters get very rich easily and the rest are left languishing

That graph ... Line should have NOT have been so parabolic

After reading revans one start wondering about the reasons why it is parabolic


Regards

[revans]

What risk was there with mining Bitcoins when difficulty was 1?

The problem with proof-of-work is that in order to make the ledger impeachable, people need to throw real-world value into a hole.

Most notably, that the time and electricity would be wasted if Bitcoin failed.

Right, so in the beginnings we're talking absolutely negligible.People throw CPU cycles at all kinds of activities more computationally intense than early coin miners and they do not consider themselves to be taking a 'risk'.

Never said it was a big risk. Just that they took it, back when it was a risk, and as a result, they have seen gains.

I don't see a problem with that... but then, I'm a capitalist, not a communist.

The problem is that for the sake of defending your argument you are attributing risk to a non-risk taking activity. I bet nobody mining these coins for fun at the time considered they were taking a risk, and yet you now argue retrospectively that somehow they were.

[Qoheleth]

I'm quoting this post because I'm worried you missed it the first time.

You wrote your post as if you were trying to make a rhetorical point.

Ah, my mistake then; it was a sincere question. I've been putting a lot of thought lately into how to improve the cryptocurrency idea.

The problem with proof-of-work is that in order to make the ledger impeachable, people need to throw real-world value into a hole.

It turns out this is no longer true. Keeping an impeachable ledger is pretty trivial. Lots of industries do it with much less computing power. Preserving the illusion that all that computing power is important, is the primary use of that computer power now.

Then, an ledger that doesn't require trusting a centralized bookkeeper.

So then... what? If this is a troubling result of the network rules, what rules would have worked better? How do you distribute newly created BTC in a "fair" way, when an anonymous system means that Sybil shenanigans are trivial? How do you incentivize mining, except via block rewards?

I'm sincerely interested in hearing your ideas.

Most of the "steady value" models involve generating and destroying coins on an as needed basis. None have been implemented yet (as far as I know) because there isn't a ground swell of interest in creating a currency in which the early adopters don't get rich.

However, for insights you might consider learning about Local Exchange Trading Systems.
http://en.wikipedia.org/wiki/Local_exchange_trading_system

Suppose Alice grows Apples, Bob grows Beans, and Charlie makes Cheese. But none of them have any money.
Now if Bob wants an Apple, but Alice doesn't want Beans, then in a LETS system they agree on a price $1 and Alice gives Bob an Apple. The transaction is accounted for using double entry book keeping. Alice + $1, Bob - $1. With LETS it is OK to have a negative balance (within limits)
Now Alice wants $1 worth of Cheese so Charlie gives it to her. Balances now are:
Alice = 0
Charley = +1
Bob = -1
Finally Charlie wants $1 from Bob so he gives them to him. That puts all balances back at zero again.
No currency exists at the moment, because no currency is needed.
When currency is needed again, it is simply created. A flexible currency supply is indeed a magical thing!

Reminds me of Digital Coin, in more than one way.

Interesting.

[Qoheleth]

It is possible, however, that top wealth holders could effectively blackmail the larger economy, threatening to crash the whole thing unless their conditions are met. This would be an example of a Nash Equilibrium. The wealthy get what they want, or nobody gets anything. Only, this is more difficult to achieve since, in Bitcoinia (as "The Economist" might put it) even while top wealth holders command a lion's share of BTC they do not, in fact, control Bitcoin. Should they make good on their threat there would be a temporary hardship, but all that will have really happened is that they managed to redistribute their wealth.

Such a threat need not be explicit. A party wishing to impose a Nash Equilibrium could employ a negative dialectic, whereby they create a perceived threat simply by withholding information. So you are afraid, for instance, that they may crash the exchange rate if it gets too high, and you don't know where that limit is because it was never made explicit. This is rather how the Fed works. But where the Fed can actually control the rate at which USD is issued, it is unlikely that this could ever be the case with Bitcoin. More likely, we would see situations as with the Hunt Brothers, or JP Morgan, and silver.

Also useful information.

Interesting trivia: if User A in Shamir's paper dumped all their coins on a Mt. Gox market order (the doomsday scenario discussed in Loper's "kill switch" article), they'd make about 3 million dollars and leave the price at a few cents, but the order book wouldn't be exhausted.

[Kárhozat]

Bitcoin fanboys

Out of curiousity, what combined currency/payment processing network/ledger system has your devotion?

You're missing an important point: no person or group issues the currency in Bitcoin. That kind of power is removed from mere human whim and given over to an agreed upon protocol. If you don't like the protocol, you can go start your own.

The bankster cabal would never think to tell us, "Hey, go start your own currency if you don't like ours."

Umm, yes a rather special group does issue the currency in Bitcoin: the miners with enough state fiat capital to invest in the increasingly expensive equipment required to mine Bitcoins.

The underlying Bitcoin implementation is fine, but I find the mining aspect hugely problematic. Bitcoins should been distributed freely to people that want them so as to provide everyone an opportunity to be part of a financial reboot. Sadly Bitcoin went down the road of having engineered inequity and is as morally bankrupt as the system it seeks to supplant.

The answer is to start an alternate cryptocurrency in which the quantity of coins generated follows a sigmoid function instead of a logarithmic function.  That way, more coins are generated as it catches on and more people start to mine.  This also means that prices will be a little more consistent over time - no 10,000 coin pizzas - before it finally starts to deflate and become a store of value.

[myrkul]

What risk was there with mining Bitcoins when difficulty was 1?

The problem with proof-of-work is that in order to make the ledger impeachable, people need to throw real-world value into a hole.

Most notably, that the time and electricity would be wasted if Bitcoin failed.

Right, so in the beginnings we're talking absolutely negligible.People throw CPU cycles at all kinds of activities more computationally intense than early coin miners and they do not consider themselves to be taking a 'risk'.

Never said it was a big risk. Just that they took it, back when it was a risk, and as a result, they have seen gains.

I don't see a problem with that... but then, I'm a capitalist, not a communist.

The problem is that for the sake of defending your argument you are attributing risk to a non-risk taking activity. I bet nobody mining these coins for fun at the time considered they were taking a risk, and yet you now argue retrospectively that somehow they were.

Just because they weren't concerned about the risk, or even didn't consider it a risk, Doesn't mean it wasn't a risk. And you're assuming they all kept them. Much more likely, they risked that taco, and gained a few pizzas or similar items of value.

[Qoheleth]

The answer is to start an alternate cryptocurrency in which the quantity of coins generated follow a sigmoid function instead of a logarithmic function.  That way, more coins are generated as it catches on and more people start to mine.  This also means that prices will be a little more consistent over time - no 10,000 coin pizzas - before it finally starts to deflate and become a store of value.

The problem is placing the bend of the S.

I suppose you could do some trick involving the ratio of difficulty to coins minted... hmm...

[Red]

Pity about the name. I just can't see something called 'PP Coin' taking off.

LMAO!

[Red]

It is a little something that doesn't have anything to do with Bitcoin in particular, called the Pareto Efficiency. There are other equilibria to be sure, some of which can be more coercive/destructive, and may also come into play. But I think Pareto Efficiency will win out in the long run.

Interesting post chodpaba. I've been arguing for a long time that the deck is stacked against Pareto Efficiency. Do you actually see a path from the here and now to there? Meaning using the current Bitcoin implementation and user base.

I think that kind of efficiency will be a possibility of the the next crypto currency. I have serious doubts there is a coherent path from here to there utilizing bitcoin.

[revans]

Bitcoin fanboys

Out of curiousity, what combined currency/payment processing network/ledger system has your devotion?

You're missing an important point: no person or group issues the currency in Bitcoin. That kind of power is removed from mere human whim and given over to an agreed upon protocol. If you don't like the protocol, you can go start your own.

The bankster cabal would never think to tell us, "Hey, go start your own currency if you don't like ours."

Umm, yes a rather special group does issue the currency in Bitcoin: the miners with enough state fiat capital to invest in the increasingly expensive equipment required to mine Bitcoins.

The underlying Bitcoin implementation is fine, but I find the mining aspect hugely problematic. Bitcoins should been distributed freely to people that want them so as to provide everyone an opportunity to be part of a financial reboot. Sadly Bitcoin went down the road of having engineered inequity and is as morally bankrupt as the system it seeks to supplant.

The answer is to start an alternate cryptocurrency in which the quantity of coins generated follows a sigmoid function instead of a logarithmic function.  That way, more coins are generated as it catches on and more people start to mine.  This also means that prices will be a little more consistent over time - no 10,000 coin pizzas - before it finally starts to deflate and become a store of value.

Exactly.

Why did early adopters need to have easy access to huge numbers of coins? Wasn't as if they could do anything with them back then. It is ridiculous that so early on in Bitcoin's life the mining difficulty is already so high, all because so much was taken at the start

[btcbug]

Just under a thousand at the moment, I have had more but have been steadily giving them away to what I deem good causes. I will ultimately give away my entire holding as my interest in Bitcoin was never to make money for doing nothing of value, and it is clear Bitcoin is now infested with speculators and the wider purpose seems to have been lost.

Send some my way please! I have almost none as I was not fortunate enough to be able to pay for expensive mining equipment and don't have enough wealth to buy my way in. You will be distributing them in a more fair manner this way. Share the wealth my friend. Very much appreciated!

1AXEPvEz1zQYcqoeeeimu2hMH1FNACZ8pZ

[revans]

What risk was there with mining Bitcoins when difficulty was 1?

The problem with proof-of-work is that in order to make the ledger impeachable, people need to throw real-world value into a hole.

Most notably, that the time and electricity would be wasted if Bitcoin failed.

Right, so in the beginnings we're talking absolutely negligible.People throw CPU cycles at all kinds of activities more computationally intense than early coin miners and they do not consider themselves to be taking a 'risk'.

Never said it was a big risk. Just that they took it, back when it was a risk, and as a result, they have seen gains.

I don't see a problem with that... but then, I'm a capitalist, not a communist.

The problem is that for the sake of defending your argument you are attributing risk to a non-risk taking activity. I bet nobody mining these coins for fun at the time considered they were taking a risk, and yet you now argue retrospectively that somehow they were.

Just because they weren't concerned about the risk, or even didn't consider it a risk, Doesn't mean it wasn't a risk. And you're assuming they all kept them. Much more likely, they risked that taco, and gained a few pizzas or similar items of value.

The Shamir paper makes it clear that early adopters went to significant lengths to hide the true extent of their hoarding of Bitcoins. frankly the more you look into the history of Bitcoin, its origins, and the actions of the early players, the more it seems like a big trojan horse.

[BitCloud]

Why don't you read the Hal Finney thread. 

https://bitcointalk.org/index.php?topic=155054.0

Thanks for pointing me towards this - everybody should be required to read the inspiring story of the first miner before crying about current exchange rates etc.

[myrkul]

Why did early adopters need to have easy access to huge numbers of coins? Wasn't as if they could do anything with them back then. It is ridiculous that so early on in Bitcoin's life the mining difficulty is already so high, all because so much was taken at the start

Difficulty is high because hashpower is high. It has nothing to do with the total # of coins mined.

[revans]

Why did early adopters need to have easy access to huge numbers of coins? Wasn't as if they could do anything with them back then. It is ridiculous that so early on in Bitcoin's life the mining difficulty is already so high, all because so much was taken at the start

Difficulty is high because hashpower is high. It has nothing to do with the total # of coins mined.

Right, so why not do the inverse? The more users the easier to generate? The way things have been done the distribution is so ridiculously skewed to a tiny base of early users it is a systemic risk.

[myrkul]

Why did early adopters need to have easy access to huge numbers of coins? Wasn't as if they could do anything with them back then. It is ridiculous that so early on in Bitcoin's life the mining difficulty is already so high, all because so much was taken at the start

Difficulty is high because hashpower is high. It has nothing to do with the total # of coins mined.

Right, so why not do the inverse? The more users the easier to generate?

Mathematics isn't your strong suit, is it?

5 minutes and a bar napkin should tell you why not.

[revans]

Why did early adopters need to have easy access to huge numbers of coins? Wasn't as if they could do anything with them back then. It is ridiculous that so early on in Bitcoin's life the mining difficulty is already so high, all because so much was taken at the start

Difficulty is high because hashpower is high. It has nothing to do with the total # of coins mined.

Right, so why not do the inverse? The more users the easier to generate?

Mathematics isn't your strong suit, is it?

5 minutes and a bar napkin should tell you why not.

Do elucidate as it seems you've jumped to an erroneous conclusion about what I proposed.

[Qoheleth]

Mathematics isn't your strong suit, is it?

5 minutes and a bar napkin should tell you why not.

Is your objection that the monetary base would grow without bound?

[Red]

This thread rocks

I liked most of your post red
However this LETS  system yiu talk about is counter party or central counter party based
Without that book keeper it will fail

Thanks Coincrazy.

Of course bitcoin's transaction graph is the implementation of that central party. However the task of recording entries into the transaction graph is distributed via random chance.

The major difference between LETS and bitcoin is that LETS usually presumes that everyone is non-anonymous.

I mention LETS not as a possible replacement to Bitcoin but as a concrete example that stable value (or unbounded coin) implementations are indeed within reasonable possibility.

I've written threads on stable money before. There have been three possible implementation proposed that I know of GEM, EnCoin, Decrits.

https://bitcointalk.org/index.php?topic=47628.0
https://bitcointalk.org/index.php?topic=49683.0
https://bitcointalk.org/index.php?topic=91183.0

I'm partial but I like my GEM discussion best. I think it's easiest to follow.

But in general I think stabilizing currency values based on energy use is un-necessary.
I've been working on some new ideas for stabilizing values while preserving the anonymous nature of bitcoin.

NOTE: I'm not a crypto anarchist. I came to bitcoin because I want to preserve the anonymous nature of physical cash, in an internet environment. Privacy is under greater threat than my money will ever be under.

[myrkul]

Difficulty is high because hashpower is high. It has nothing to do with the total # of coins mined.

Right, so why not do the inverse? The more users the easier to generate?

Mathematics isn't your strong suit, is it?

5 minutes and a bar napkin should tell you why not.

Do elucidate as it seems you've jumped to an erroneous conclusion about what I proposed.

Is your objection that the monetary base would grow without bound?

It would need to, or we'd rapidly hit that bound, and then new users would come in and post threads like this one, whining about the early adopters having all the coins.