Forking the Blockchain for Bonds (25 BTC Bounty)

[phillipsjk]

I'm worried that the bitcoin community will take an extremely rigid approach and try to avoid forks at all costs. I think excessive rigitidity will cause bitcoin to fail. If need be, I certainly plan to try to contribute towards the introduction of a new blockchain. In the meantime, I will continue to push for forking which I view as better for cryptocurrency at large.

Finally, if one introduces a new blockchain, it is better to introduce many improvements simultaneously rather than just one. This is just one of the ones I have in mind.

I disagree completely. I think starting a new block chain will almost always be better than forking the existing one. Forking the chain undermines the currency; thus eroding confidence and value.

A rival blockchain is not something to be feared. There already exists the testnet and namecoin blockchains. If somebody starts up a "Bitcoin with bonds" blockchain, some people may move over to it. If you are correct that bonds are needed for long-term stability, it may even become the new "standard." It does not matter if people have money invested in the first bitcoin: If the transition happens slowly enough, the people who want to sell bitcoin can sell it in exchange for "bitcoin with bonds".

The reason I am so cavalier about the failure of bitcoin is that I expect any crypto-currency, no matter how good, to fail in the medium-long term. Computers are just not secure enough to handle a crypto-currency in my opinion. Modern computers systems are complex and unproven. Subtle errors missed by this oversight can likely be leveraged into a devastating attack on any crypto-currency; given enough time an resources. For the record, I expect the computer industry to finally mature into reliable, proven correct systems after about 6 generations (150 years) or so. As precedent, I point to the Agricultural revolution, the invention of the wheel and the printing press. All took centuries to fundamentally change society.

[phillipsjk]

Mostly, loans require trust outside the system.  You give someone the loan and if they buy something with the money, the seller gets the money.  The lender has no further claim against the seller.

A loan that is enforced by the system would effectively be a coin that expires at time X (and reverts back to its original owner).  I doubt people would be willing to treat it as a full bitcoin, but maybe it would have some value.

I think it is still prudent to investigate is it is possible using scripting. If so, it would be a double-spend attack with a potentially years-long lag time.

[cunicula]

Mostly, loans require trust outside the system.  You give someone the loan and if they buy something with the money, the seller gets the money.  The lender has no further claim against the seller.

A loan that is enforced by the system would effectively be a coin that expires at time X (and reverts back to its original owner).  I doubt people would be willing to treat it as a full bitcoin, but maybe it would have some value.

I think it is still prudent to investigate is it is possible using scripting. If so, it would be a double-spend attack with a potentially years-long lag time.

Phillip could you rephrase or Elaborate? I don't understand.

[cunicula]

I'm worried that the bitcoin community will take an extremely rigid approach and try to avoid forks at all costs. I think excessive rigitidity will cause bitcoin to fail. If need be, I certainly plan to try to contribute towards the introduction of a new blockchain. In the meantime, I will continue to push for forking which I view as better for cryptocurrency at large.

Finally, if one introduces a new blockchain, it is better to introduce many improvements simultaneously rather than just one. This is just one of the ones I have in mind.

I disagree completely. I think starting a new block chain will almost always be better than forking the existing one. Forking the chain undermines the currency; thus eroding confidence and value.

A rival blockchain is not something to be feared. There already exists the testnet and namecoin blockchains. If somebody starts up a "Bitcoin with bonds" blockchain, some people may move over to it. If you are correct that bonds are needed for long-term stability, it may even become the new "standard." It does not matter if people have money invested in the first bitcoin: If the transition happens slowly enough, the people who want to sell bitcoin can sell it in exchange for "bitcoin with bonds".

The reason I am so cavalier about the failure of bitcoin is that I expect any crypto-currency, no matter how good, to fail in the medium-long term. Computers are just not secure enough to handle a crypto-currency in my opinion. Modern computers systems are complex and unproven. Subtle errors missed by this oversight can likely be leveraged into a devastating attack on any crypto-currency; given enough time an resources. For the record, I expect the computer industry to finally mature into reliable, proven correct systems after about 6 generations (150 years) or so. As precedent, I point to the Agricultural revolution, the invention of the wheel and the printing press. All took centuries to fundamentally change society.

You make some good points here. I still favor forking, but I can understand your reasoning. One issue is that forking is an unknown. No one can be sure hoow smoothly it will occur. I would like to see a demonstration of this because I view forking as one of the best features of the technology. It promises to provide some protection from obsolescence of the underlyong bitcoin technology. Can it fulfill this promise? I want to see a demonstration.

Perhaps you can see why I don't agree with you about forking eroding value.

[phillipsjk]

I think it is still prudent to investigate is it is possible using scripting. If so, it would be a double-spend attack with a potentially years-long lag time.

Phillip could you rephrase or Elaborate? I don't understand.

I looked at the scripting opcodes and my eyes kind of glazed over. I am currently assuming an automated loan is not possible.

The reason I am potentially concerned about a double-spend attack is what happens if somebody uses these bonds to buy goods or services? On the appointed date, they would "cash out," leaving the bond-holder with nothing.

Thinking about it a little more, I decided a customized client is probably needed to use "weird" scripts anyway. The default Bitcoin client probably mainly sticks to "standard" transactions, which are also scripts. Again, I have not carefully checked if my impressions are true or not. The default client will relay "weird" transactions with no problem as far as I can tell.

One issue is that forking is an unknown. No one can be sure hoow smoothly it will occur. I would like to see a demonstration of this because I view forking as one of the best features of the technology. It promises to provide some protection from obsolescence of the underlyong bitcoin technology. Can it fulfill this promise? I want to see a demonstration.

A "Fork" in the traditional sense won't work: it is all or nothing. The clients not recognizing the fork will studiously ignore it.

That said, there is reason to believe that if there is a compelling reason, all (or at least the majority)  of the participants can agree to a protocol change. If the change is not urgent, it can take place with decades of lead time. However, in order to get the (vast) majority to agree, the change should be non-controversial. I think your bond proposal would be too controversial to gain widespread acceptance for a protocol change. A non-controversial change would be something like: changing the hash function if collisions are demonstrated with SHA-256. Or, possibly, increasing the sub-divisibility beyond 8 decimal places if too many bitcoins are lost over the years.

Edit: I already explained why I think these non-controversial changes won't happen: I think bitcoin fail (and be replaced with something better) before the specific design choices become too inconvenient. (That is to say, I don't think Bitcoin will fail based on its own technical merits.)

[cunicula]

A "Fork" in the traditional sense won't work: it is all or nothing. The clients not recognizing the fork will studiously ignore it.

That said, there is reason to believe that if there is a compelling reason, all (or at least the majority)  of the participants can agree to a protocol change. If the change is not urgent, it can take place with decades of lead time. However, in order to get the (vast) majority to agree, the change should be non-controversial. I think your bond proposal would be too controversial to gain widespread acceptance for a protocol change. A non-controversial change would be something like: changing the hash function if collisions are demonstrated with SHA-256. Or, possibly, increasing the sub-divisibility beyond 8 decimal places if too many bitcoins are lost over the years.

Edit: I already explained why I think these non-controversial changes won't happen: I think bitcoin fail (and be replaced with something better) before the specific design choices become too inconvenient. (That is to say, I don't think Bitcoin will fail based on its own technical merits.)

In other words, convincing people to fork the blockchain requires the introduction of a serious threat to incumbents.  Without a looming threat, there is no way that the bitcoin sytem will ever be changed.

Given that threatened destruction is a prerequisite for change, the only way to make bitcoin better is to introduce a competing blockchain which threatens bitcoin. If the competing blockchain gains substantial traction (say one twentieth of the market cap of bitcoin), it would strongly suggest that the new currency's protocol was superior to bitcoin's. [Bitcoin couldn't wait too much longer than this to react. Since any reaction would inevitably be slow and cumbersome.]

Best Case Scenario: Once bitcoin users are threatened by the new blockchain, they agree to copy its protocol. If they copied the new protocol quickly enough, then the competing currency would cease to hold value. (With two identical products, the biggest network will win every time). In the best case scenario, bitcoin is demonstrated to have an effective governance system.

Worst Case Scenario: There is a good probability that bitcoin would never get its shit together and introduce the necessary changes in time. If this occurs, bitcoin will collapse, and the new cryptocurrency will take over.  Everyone would have to hope that the new currency adds a better governance system so that Worst Case Scenarios aren't repeated.

Does this seem like a reasonable analysis to you? 

[markm]

You can have a fork of the kind you seem to want easily. You simply grab the existing bitcoin blockchain up to whatever specific point you want to fork from to use as blockchain for your own new vurrency so that you have an existing bunch of stakeholders, everyone who is rich in bitcoin being rich in your new blockchain too.

-MarkM-

[Romoku]

I'm surprised the OP hasn't heard of Open Transactions.

https://github.com/FellowTraveler/Open-Transactions/wiki

It's pretty much what he is describing:

http://forum.bitcoin.org/index.php?topic=28565.msg363945#msg363945

[cunicula]

I'm surprised the OP hasn't heard of Open Transactions.

https://github.com/FellowTraveler/Open-Transactions/wiki

It's pretty much what he is describing:

http://forum.bitcoin.org/index.php?topic=28565.msg363945#msg363945

No, it is not. There is an implicit tax on all transactions in future claims unless the claims are issued by the blockchain itself. This has been discussed in this thread and my thread on "securing contingent claims"

[Romoku]

I'm surprised the OP hasn't heard of Open Transactions.

https://github.com/FellowTraveler/Open-Transactions/wiki

It's pretty much what he is describing:

http://forum.bitcoin.org/index.php?topic=28565.msg363945#msg363945

No, it is not. There is an implicit tax on all transactions in future claims unless the claims are issued by the blockchain itself. This has been discussed in this thread and my thread on "securing contingent claims"

I guess what you're wanting then is what was suggested earlier of a bondcoin backed by the bitcoin chain.

Bitcoin wasn't really created to take on all functions of a market (at least I believe that). It is the digital equivalent to gold.

It's entire purpose it to open up a new canvas of money aside from the traditional system and change the perception of who should control money.

This looks a little hard to implement or not even worthwhile in the main bitcoin chain, so I would suggest getting it implemented in the testcoin chain and seeing if there is a demand for bondcoins.

https://en.bitcoin.it/wiki/Testnet

I'm sure if enough people get into the idea it could become possible from a free enterprise perspective.

There's even a post about it:

http://forum.bitcoin.org/index.php?topic=7219.0