[white paper] Purely P2P Crypto-Currency With Finite Mini-Blockchain

[kalon]

This is a very interesting thread and quite in depth. I have been keenly following Bitfreak's mini block chain proposal since it seems to solve one of Bitcoin's impending problems. I can see that there are other's in this thread that would agree there are other problems with Bitcoin and ideally a new cryptocurrency would address as many of those problems as possible, particularly the economic ones.

The deflationary model that Bitcoin follows is all well and good if you want a commodity and enthusiast  see no problem with the value increasing for eternity. However, posters here seem to recognize problems with this. Both a reluctance to spend (I have a few Bitcoins and I'm not spending them now if I don't have too.) and the inevitable concentration of wealth as super rich hoarders spend smaller and smaller fractions of their money to the poor masses for goods and services.

Thinking about these problems I looked at Freicoin the idea of demurrage would be a hard sell for most and one which make me uninterested in holding any. I also looked at Peercoin and I was quite enthusiastic about it's improvements, I think there are lessons which could be learned from it. My main problem with it is it's lack of professional marketing. Sunny King seems like a good guy but perhaps easily distracted. POS sounds like a good idea and the slight inflation which it involves seems like it would address some of the problem of Bitcoin, however, I do wonder if there could be an even better way.

Initially I disliked the idea of Bitcoin's fixed supply but I think with a slight tweak it could be the best solution. We want to have something which will act as a solid currency, encouraging people to spend their wealth but without penalizing them for saving as seems to be the case with Freicoin. We also want to avoid the problem of deflation from lost coins (government seizers, death of hoarders without wills, lost keys and mistaken transfers). Bitfreak suggested somewhere that coins in unused accounts should be removed and remind after some lengthy period of time (something like 100 years) just to avoid long term deflation but I see doing this on a smaller time scale as being beneficial in other ways.

I'd propose that transactions should have a set fee based on percentage; what exactly I think is debatable but I'd say 1%. Perhaps it's not important but I tend to think following Peercoin's model that tx fees are burned is a good one, so that they have to be re-mined. Having a percentage based tx fee might be more costly than Bitcoin for large transactions but could be cheaper for small transactions than the limit which is likely in Bitcoin once new coins are finished being mined. This would encourage greater adoption in developing markets.

Now, if unused coins are burned at an arbitrary time but smaller than one hundred years; I'd say 5 years. not only ensure that lost coins are not gone forever but also encourage spending without being punitive and without debasing the currency. People who use the currency on a daily basis would never be affected and people with large untouched saving could simply move the money, albeit at a lose of the tx fee. Obviously the client would need to use coins in a first in first out method and indications for coin age would need to be clear. Perhaps clients could automatically move coins if approaching the end of cycle. This would still be okay since the dead and people with lost keys are unlikely to keep a client going for 5 years.

Since you would know the maximum number of coins to be produced and you'd know roughly how many are in circulation you'd have a much better understanding of the health and value of the network and would be far less likely to have wild value swings due to uncertainty. Peercoin's per-block re-targeting system could be implemented in such way as to taking into account dynamics of the money supply.

I can imagine that the proposal of a set tx percentage and the necessity to move unused assets might be less preferential to some but it would strengthen the network and ensure that miners always have incentive to mine. Additionally, I think there are other small things which could be done to ensure ease of use which could allow for the easy adoption of what I believe would be a much better currency.

Sorry for being long winded. I was saving some of that up for awhile. I'd love to know some of your thoughts.  

[AnonyMint]

Demurrage from the perspective of the saver is sometimes not different than debasement. They are both a % per year of value taken from you. The former is explicit as you see your balance decrease, and the latter is obfuscated because the value of your money may drop as the money supply increases.

However, you don't sell your Bitcoin now even though the debasement is 11% per year, because the value of your BTC is increasing because demand for BTC is increasing.

So while a cryptocurrency is starting, the debasement can be very high and no one will protest because the value is rising.

When a cryptocurrency ever becomes mature and a significant portion of the global economy uses it, then no one will protest if the debasement is 3% and the GDP growth rate is 5%, because the value of their money will likely be increasing (by more than 2% due to rise in monetary velocity also).

You won't get a sustainably SECURE cryptocurrency without debasement.

Transaction fees don't insure sustained mining and protection against cartels, because even if you make them mandatory, a cartel can refund them, "spend your Bitcoins here at Amazon.com and we will refund the transaction fees".

They can offer to refund debasement too, but that won't prevent others from earning from mining. Whereas with tx fees, if they can get most customers to send their transactions to them, they can hold back all income from other miners.

HOW MANY TIMES HAVE I WRITTEN THIS!!! I think 50 times now. And still some readers never remember. (I wrote it upthread 2 or 3 times)

[kalon]

AnonyMint, in some ways I cannot tell if you are responding to my post. You touched on a couple key words but then revert to your own talking points without much consideration of the ideas I've put forward. I have read all of your up thread posts and have forgotten nothing. I've read some of your posts in other threads but to be frank, there are a lot of intelligent people in the forum and to hang on just your words alone would detract from other interests and necessities in my life.

Regarding debasement, I tend to agree with you and I wonder why you do not speak more of a POS system. Essentially Peercoin and derivatives such as Novacoin and the like debase the currency by offering savers interest, though I believe it's closer to 1%. I really don't have a problem with this. It seems quite logical from a standpoint of how saving accounts appear for users with fiat and of course POS has other benefits as well.

However, I don't think that POS interest addresses the issue of spending and demurrage addresses it in a way which I think people find too punitive. However, simply paying a small percentage in tax on spending which affects all people equally and supports the network is something which I think all people are quite comfortable with. Having a coinage limit which forces people to either spend or move money after some years will encourage use of the coins as currency but will in no way affect people of few means like demurrage would and would not inflate the economy like interest producing POS would.

AnonyMint, we cannot count on ever growing GDPs and I assume that you are suggesting a method of debasement beyond the control of any governing body. An eternally inflating money supply only sounds marginally better than a deflating one. A system like Bitcoin's set maximum along with incentives to spend and recycle coins would keep the system in near perfect equilibrium.

As far as mining pools centralizing coin minting, this is a different problem which I'd like to see addressed in such way as to make it more egalitarian. I'm unsure of how this can be done but it would surely be beneficial both in terms of fairness and avoiding a 50%+ attack.

[AnonyMint]

Two new thoughts since I last posted:

1. The more anonymous the cryptocurrency, the more likely that the corrupt in the captured political systems of the world today are going to be hiding their money in the anonymous system as the hunt for wealth spreads as the socialism's bankruptcy reaches the end game. USA, Europe, China, India, etc are all run by powerful groups who are hiding money offshore. For example, it is well known (e.g. Michael Pettis wrote about this) that the Chinese taipans move their exports through tax havens such as Singapore (at least on paper) to hide profits offshore, which they then keep hidden offshore. Also Chinese politicians move their ill-gotten wealth offshore, e.g. their wife (or wives) and kid(s) live in the Western countries in expensive homes and attend private schools, etc..

So while an anonymous crytocurrency can help defeat the power government has over the individual, it can also enable the corrupt in the system to escape oversight from the government. I imagine that as this global debt crisis comes to an end game, the populace is going to prosecute ill-gotten wealth. We see pronouncements from the G20 headed this direction. This will cause the nations to cooperate to hunt down all wealth. It will be indiscriminate (because of the irrationality of socialism) and all wealth will suffer, ill-gotten or otherwise.

Thus, it is desirable to have an anonymous cryptocurrency, because if it makes nations impotent, then they won't be able to come together to form a world government to hunt down all wealth. And the ill-gotten wealth will be transferred to those who are early into that anonymous cryptocurrency (if someone creates it).


2. If someone creates a cryptocurrency where only CPUs can mine effectively (or at least ASICs and FPGAs have no significant advantage), then the return on mining investment will likely be negative. Meaning many people will mine at small economies-of-scale with their PC and not notice they are consuming more resources than they are generating in coin rewards for mining. The implication is that it will be that much more difficult for a cartel to take over mining, when they have to do it basically for free and compete against the billions of computers of the populace.

Regarding debasement, I tend to agree with you and I wonder why you do not speak more of a POS system. Essentially Peercoin and derivatives such as Novacoin and the like debase the currency by offering savers interest, though I believe it's closer to 1%. I really don't have a problem with this. It seems quite logical from a standpoint of how saving accounts appear for users with fiat and of course POS has other benefits as well.

I don't believe PoS systems are secure because my understanding is that the input entropy can be preimaged which selects which peer can decide which transactions are valid. Someone may eventually prove me wrong, yet for now I am operating under the expectation instead that PoS systems will be hacked if they ever become significantly valuable.

Also I believe the economics are collectivism, which rewards failure (laziness, lack of initiative, lack of ingenuity, etc). Paying someone just for letting money sit there. I prefer that miners must proactively manage their resources to help secure the network, e.g. PoW.

In short, I believe competition, not socialism, is the correct economic paradigm.

However, I don't think that POS interest addresses the issue of spending and demurrage addresses it in a way which I think people find too punitive. However, simply paying a small percentage in tax on spending which affects all people equally and supports the network is something which I think all people are quite comfortable with. Having a coinage limit which forces people to either spend or move money after some years will encourage use of the coins as currency but will in no way affect people of few means like demurrage would and would not inflate the economy like interest producing POS would.

I don't believe this will secure the network.

AnonyMint, we cannot count on ever growing GDPs

If we couldn't count it, we would still live at the very low standard of the Kings of yore, with high mortality from bacterial infections, slow transportation, communication by courier instead of by wireless, etc..

Sorry but the illogic of Malthusians annoys me. How can some people be so out-of-touch with reality and history? And they repeat incessantly the same (what I believe to be) nonsense.

If the GDP stops growing for decades, that means humans are on a trajectory to end their existence (or at least tempt existential threat into a 600 year Dark Age), i.e. declining populations and/or stopping the development of new technology.

and I assume that you are suggesting a method of debasement beyond the control of any governing body. An eternally inflating money supply only sounds marginally better than a deflating one.

It is essential. I believe the network can't be secured without. I provided all my logic.

A system like Bitcoin's set maximum along with incentives to spend and recycle coins would keep the system in near perfect equilibrium.

There is no such thing in our world as perfect equilibrium. I assume you are thinking of some state of non-change. There are dynamic oscillations around a median, but never you will find flatlines in the real world. And if you want to understand the math and physics for this, then you can read my blog. Flatline means a uniform distribution, which means no change, which means no competition, no contrast (black is only visible if you have gradations of white), no knowledge creation, and no life at all.

http://unheresy.com/The%20Universe.html#Matter_as_a_continuum

http://unheresy.com/Information%20Is%20Alive.html

As far as mining pools centralizing coin minting, this is a different problem which I'd like to see addressed in such way as to make it more egalitarian. I'm unsure of how this can be done but it would surely be beneficial both in terms of fairness and avoiding a 50%+ attack.

Simple. Make so mining computers don't need to have the resources to deal with a multiple-GB blockchain (i.e. implement the Mini-blockchain), and eliminate the advantage of non-CPUs.

Competition can still reign, yet amongst computers with CPUs and reasonable resources, e.g. typical amount of DRAM.

[digitalindustry]

Initially I disliked the idea of Bitcoin's fixed supply but I think with a slight tweak it could be the best solution. We want to have something which will act as a solid currency, encouraging people to spend their wealth but without penalizing them for saving as seems to be the case with Freicoin. We also want to avoid the problem of deflation from lost coins (government seizers, death of hoarders without wills, lost keys and mistaken transfers). Bitfreak suggested somewhere that coins in unused accounts should be removed and remind after some lengthy period of time (something like 100 years) just to avoid long term deflation but I see doing this on a smaller time scale as being beneficial in other ways.

I'd propose that transactions should have a set fee based on percentage; what exactly I think is debatable but I'd say 1%. Perhaps it's not important but I tend to think following Peercoin's model that tx fees are burned is a good one, so that they have to be re-mined. Having a percentage based tx fee might be more costly than Bitcoin for large transactions but could be cheaper for small transactions than the limit which is likely in Bitcoin once new coins are finished being mined. This would encourage greater adoption in developing markets.

Now, if unused coins are burned at an arbitrary time but smaller than one hundred years; I'd say 5 years. not only ensure that lost coins are not gone forever but also encourage spending without being punitive and without debasing the currency. People who use the currency on a daily basis would never be affected and people with large untouched saving could simply move the money, albeit at a lose of the tx fee. Obviously the client would need to use coins in a first in first out method and indications for coin age would need to be clear. Perhaps clients could automatically move coins if approaching the end of cycle. This would still be okay since the dead and people with lost keys are unlikely to keep a client going for 5 years.

~~~~

Sorry for being long winded. I was saving some of that up for awhile. I'd love to know some of your thoughts.  

This is an interesting idea ....

And as say an inbetween , lets call it a "negative interest rate" , what about instead of large savers paying the ultimate price for a saving on a 5 year limit , instead have say a phased system :

1 to 5 years , upon stagnant savings , fee is charged , saving is not threatened. 

5 to 10 years , larger fee .

Above 10 years recycled or tagged with a large warning on the client that thecsavings have been tagged .

11 th year recycled. Remined.

I would advocate the 0 to 5 year fee could be adjustable .

People wouls yell control perhaps , but in the end its a cryptocurrency , people miss a lot of political issues , just probably though ignorance on these matters .

For  example the ACP or ACCP checkpoints in general , people seem to have a hard time distinguishing between a forced system and a choice system .

[AnonyMint]

---------Definition of Government---------------
http://esr.ibiblio.org/?p=5044&cpage=1#comment-411923

Well, yes. I would say that. Governments are based on the threat and use of force, up to and including the killing and inevitable murder of the people they claim to be the governing.

This isn’t merely a contingent property of government, it’s the essential one. Read your Max Weber: a government is, definitionally, an organization which claims a monopoly on the legitimate use of physical force (thus, a monopoly on legal murder). Political science has failed to improve on this definition since it was proposed in 1919.

------------------------------------------------

And replacing a well established currency is [nearly] impossible, because the masses are not enlightened AND NEVER WILL BE (is a few 1000s years of history not enough proof of human nature?). Ask all those who have tried to compete with fiat.

Note a jury convicted a hero who tried:

http://en.wikipedia.org/wiki/G._Edward_Griffin#The_Creature_from_Jekyll_Island

Griffin's advocation of a free-market, private-money system superior to the Fed caused Bernard von NotHaus to deploy such a system in 1998.

http://en.wikipedia.org/wiki/Bernard_von_NotHaus#Arrest_and_conviction

In connection with the Liberty Dollar business, a federal grand jury brought an indictment against von NotHaus and three others in May 2009, and von NotHaus was arrested on June 6, 2009

On March 18, 2011, after a 90 minute jury deliberation, von NotHaus was found guilty on various counts, including the making of "counterfeit coins" (resembling legal tender coins). Attorney for the Western District of North Carolina, Anne M. Tompkins, described Bernard von NotHaus and the Liberty dollar as "a unique form of domestic terrorism” that is trying “to undermine the legitimate currency of this country.” The Justice Department press release quotes her as saying: “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country".

Interestingly a recent article related Bitcoin as the successor to the Liberty Dollar:

http://lfb.org/today/the-domestic-terrorist-you-can-call-a-hero/

The feds raided him in in 2006. In 2007, the government outright stole 2 tons of coins from him, many of them featuring an image of Ron Paul, plus 500 silver coins and 50 gold coins. They threw him in jail and dragged his name through the mud many times.

He was later convicted of making counterfeit coins — an ironic conviction given that he was making silver coins to compete with official coins made out of scrap metal. That conviction was in March 2011, fully 2½ years ago. The government labeled him a “domestic terrorist.”

After all, the feds threw every conceivable charge at him. The jury didn’t buy it, but finally did have to admit the he seemed to be producing and distributing what claimed to be dollars, but differed rather substantially from U.S. government dollars. That was the basis of the counterfeiting claim. The claim alone implies that somehow he was tricking people, which is ridiculous, since the whole reason his coins were marketable was precisely because his customers knew that his coins were real and, in this respect, differed completely from what the U.S. government distributes.

Think about the many distributive technologies that came out in these frontier days in which a new world was being born. All the Internet giants were being born during these years. Other services were simply distributive, such as Napster, which completely revolutionized music distribution, but was crushed by the feds in 2001.

The result was the deep entrenchment of distributed network file sharing, which is more ubiquitous than ever before. All these movements were about challenging the status quo in a fundamental way, the daring decision to take on state-blessed institutions and tap into the power of the consuming public to choose private over public services.

The movement was not killed, despite every attempt. What it actually did was change the whole way we get our services, use the Internet, and engage each other in our social and economic lives. In a rapid and thrilling way, we began to see all the ways in which power could be devolved away from the elites and toward the people. It has left a permanent mark on the world.

The Liberty Dollar was part of this movement. For decades, some very high-level intellectuals had taken note of the decline of the quality of money, from about, oh, 1913, all the way to the advent of pure paper money in 1971. The inflation of the late 1970s made the point: There has to be a better way. Economist F.A. Hayek wrote that it was entirely possible that a high-quality private money could compete with a government money.

But who would step out and make the attempt? What entrepreneur would dare come forward and offer up an alternative as a product in the consumer market?

Bernard von NotHaus was the man. There is nothing illegal about minting silver into round shapes and putting pictures on them. It’s not even clear that there is anything wrong with calling it a dollar, provided he didn’t try to claim it was a government dollar. And this is exactly what he did.

The money monopolists in Washington went absolutely nuts about this. They threw the book at him, and added some of the most hilarious rhetorical flourishes that one can imagine. The attorney who prosecuted the case for the government said the following:

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism. While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country. We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”

But they stopped Bernard, right? Didn’t he fail? He can be very confident in knowing that he made a gigantic mark in history. He demonstrated that it could be done. He threw a model out there that would not go away. And only two years after the looting of his business, an ambitious computer programmer created a code protocol that became what is now known as Bitcoin.

But the inventor of Bitcoin — whose identity is either completely unknown or one of the best kept secrets in history — knew better than to operate like a business. He made not silver rounds, but digital units. He didn’t store these units in one place, but rather had them live on a globally distributed network that no government can shut down. He relied not on a third-party transmitter, but instead made it possible for this new currency to be traded peer to peer.

Bitcoin is a brilliant combination of the Liberty Dollar’s soundness and Napster’s distribution methods, with a few extra features thrown in to protect it against shutdowns.

In other words, Bernard von NotHaus took one for the sound-money team, and, in time, the world will see that his instincts were exactly right. Monopolies can’t last. Not even the world’s most powerful government can keep quality and consumer preference at bay forever. His idea pointed to a bright future in a revolutionary way. The revolution will not occur with guns and battles, but through enterprise, entrepreneurship, and a billion tiny acts of peaceful consumer choice.

[AnonyMint]

We can't stop velocity and debt overshoot and the downwave bankruptcies, but we can accomplish three improvements with the improvements I suggest for Mini-blockchain + perpetual debasement PoW:

1. Remove the most obvious design flaw(s, both reducing blockchain overhead and 0% transaction fee, c.f. upthread for detailed explanations) that makes it easy for cartels to control mining.

2. Remove centralized control over the perpetual creation of money, thus reduce the ability to use crisises to reward those who control the government.

3. Make it very difficult for those who lend to be backstopped by insurance (and thus implicitly by the government) and thus they have to go bankrupt more frequently thus keeping bubbles small and more frequent, also preventing them from aggregating too much capital (they then have to deal with the economy-of-scale of small risk differences for each loan). One way this happens is if the coin eliminates the ability to tax. So there isn't any funding for collective insurance. Because realize that private insurance MUST always fail (another math to discuss) so public bailouts are inevitable. There are other points I could make on this...

Add:

4. Remove the capability for the private banks to create base money out-of-thin air when they issue loans on reserves:

http://en.wikipedia.org/wiki/G._Edward_Griffin#The_.22Mandrake_mechanism.22

Of course they may still be able (if not illegal) to write more receipts for deposits, than they have reserves, but they won't actually be able to create base cryptocurrency money, thus bank runs and defaults should be more frequent and self-correcting (as they were in the 1800s on a gold base money with gold certificates as receipts for deposits). The subversion is if the receipts begin trading as currency (e.g. Ripple currency) and are more widely accepted than the cryptocurrency base money, which I guess is what happened near the end-game of the 1800s.

Griffin's view is similar to many other gold-standard supporters' critique of the fractional-reserve banking system and the Federal Reserve in particular: that it makes money "magically" appear from nothing.

In Griffin's view, the "magical" quality of this mechanism is really just a simple mathematical limit. When banks loan money, they don't actually loan existing money. Rather, they allocate money to loan, but they are limited by how much money they can create. The law basically says that, for each dollar a bank has on hand in one of its savings accounts, it is allowed to create another 90 cents to give out as a loan. (The dollar from the savings account is still there, and can still be spent by the person who owns the savings account.) This loan is then spent, and the recipient puts it into another bank, and that bank can now loan 90 cents times 0.9 = 81 cents. This can be repeated many times (depending on the demand for loans) until it approaches its mathematical limit of 10 dollars.

For example, when the Federal Reserve holds on deposit 1 billion in marketable United States Treasury security then the banks in the banking system, public and private, and bound by U.S. financial law, are able to generate 10 billion in new debt over time.

Readers (I know Etlase2 knows this), please realize I am not talking about eliminating investors-at-risk from aggregating capital, i.e. I am not anti-capitalism. Rather I am saying that loaning money to anyone with a heartbeat is a low-knowledge activity that should not be backstopped by the public (government + insurance).

You can see that taxes (government) and insurance (along with inflated real estate prices by giving everyone with a heartbeat a 30 year mortgage which pulls 30 years of future demand into the present radically raising prices) are the major reason western countries are more expensive than developing countries which don't have high government as a percent of GDP, don't have well developed insurance industry, and don't have high debt levels as of percent of GDP:

http://www.thaivisa.com/forum/topic/677362-whats-your-monthly-cost-to-live-in-thailand/

http://grandfather-economic-report.com/#govt

http://www.heritage.org/index/explore (sort by "Govt Spending")

http://www.gfmag.com/tools/global-database/economic-data/11855-total-debt-to-gdp.html
(Total Debt, which is more accurate)

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt
(Public Debt, which misses much of the debt in countries such as China)

http://en.wikipedia.org/wiki/List_of_countries_by_future_gross_government_debt
(Future Public Debt, captures some of the rises in debt coming, yet misses many of classes of debt and contagion effects coming)

[BombaUcigasa]

It is not clear what is the deal with the fees:
- Will the pruned blocks delete the already given mining fees, if so that would break transactions that spend the fees?
- Do the pruned blocks keep the mining fees transactions, how do they preserve the special coinbase transaction for this?
- Who pays for the new block that includes already mined transactions with spent fees? Does the new block offer just new transactions fees?
- Do you use recurring fees, thus double-triple-Xuple charge someone's account down to 0 and create artificial demurrage?


I ask only because it is unclear in the whitepaper, and it was one of the things that stopped me from joining the bounty efforts.

[AnonyMint]

Perhaps you might get a response from the original proponents. I think I can possibly answer correctly interim.

It is not clear what is the deal with the fees:
- Will the pruned blocks delete the already given mining fees, if so that would break transactions that spend the fees?
- Do the pruned blocks keep the mining fees transactions, how do they preserve the special coinbase transaction for this?

These end up in account balances tree, just as any other transaction does. All transactions are secured into the account balances the same way (eternal proof chain + sliding window of transaction history).

- Who pays for the new block that includes already mined transactions with spent fees? Does the new block offer just new transactions fees?

Huh? Perhaps I am misunderstanding your question; sounds like you misunderstand how transactions work in Bitcoin versus this proposed Mini-blockchain.

- Do you use recurring fees, thus double-triple-Xuple charge someone's account down to 0 and create artificial demurrage?

No. I don't know where you got this idea. I will guess that you have some confusion about how the blockchain works in Bitcoin versus this proposed Mini-blockchain and this may be causing you to invent things that have not been stated.

[BombaUcigasa]

That's because the whitepaper mentions "fees" 5 times, yet they are used only in philosophical contexts and not in examples or suggested rules.

When pruning an old block, for which fees have already been paid, the transactions will be included for free in the new block, at the cost of the current effort minus current fees.

How can then the mini-blockchain offer "lower fees" if more effort is needed for the same reward?

[digitalindustry]

Add:

4. Remove the capability for the private banks to create base money out-of-thin air when they issue loans on reserves:

http://en.wikipedia.org/wiki/G._Edward_Griffin#The_.22Mandrake_mechanism.22

Of course they may still be able (if not illegal) to write more receipts for deposits, than they have reserves, but they won't actually be able to create base cryptocurrency money, thus bank runs and defaults should be more frequent and self-correcting (as they were in the 1800s on a gold base money with gold certificates as receipts for deposits). The subversion is if the receipts begin trading as currency (e.g. Ripple currency) and are more widely accepted than the cryptocurrency base money, which I guess is what happened near the end-game of the 1800s.


+1

Now you make more sense anonymint.

Ripple is essentially designed for this purpose,  but actually it serves no purpose, where as in an old analog system ripple could actually serve a purpose,  its a paradox of sorts,  it reminds me a little of the zeitgeist paradox I identified.

For example break down the headline just basic support for this movement and you will find a large demographic in post what i would call " post cocommunists baby boomers" , what im trying to state badly is , those generations after the " communist baby boomers" .

So we have these supporters , of the zeitgeist movment , but wait for it :

Without "multidimensional information" ,  a  the zeitgeist movement would not exist,  but also without "multidimensional information"  the zeitgeist movement may have been very large , but because of it primary reason for existance is also the reason for its failure.

So we have this effect you see.

One in fact Tesla predicted,  maybe the genius of all humans?

[BombaUcigasa]

Add:

4. Remove the capability for the private banks to create base money out-of-thin air when they issue loans on reserves:

http://en.wikipedia.org/wiki/G._Edward_Griffin#The_.22Mandrake_mechanism.22

Of course they may still be able (if not illegal) to write more receipts for deposits, than they have reserves, but they won't actually be able to create base cryptocurrency money, thus bank runs and defaults should be more frequent and self-correcting (as they were in the 1800s on a gold base money with gold certificates as receipts for deposits). The subversion is if the receipts begin trading as currency (e.g. Ripple currency) and are more widely accepted than the cryptocurrency base money, which I guess is what happened near the end-game of the 1800s.


+1

Now you make more sense anonymint.

Ripple is essentially designed for this purpose,  but actually it serves no purpose, where as in an old analog system ripple could actually serve a purpose,  its a paradox of sorts,  it reminds me a little of the zeitgeist paradox I identified.

For example break down the headline just basic support for this movement and you will find a large demographic in post what i would call " post cocommunists baby boomers" , what im trying to state badly is , those generations after the " communist baby boomers" .

So we have these supporters , of the zeitgeist movment , but wait for it :

Without "multidimensional information" ,  a  the zeitgeist movement would not exist,  but also without "multidimensional information"  the zeitgeist movement may have been very large , but because of it primary reason for existance is also the reason for its failure.

So we have this effect you see.

One in fact Tesla predicted,  maybe the genius of all humans?

Everything you wrote here that you think it makes sense ... it doesn't.

[AnonyMint]

When pruning an old block, for which fees have already been paid, the transactions will be included for free in the new block, at the cost of the current effort minus current fees.

How can then the mini-blockchain offer "lower fees" if more effort is needed for the same reward?

The pruned transactions are discarded and not added to new blocks (otherwise how would we shrink the blockchain which is the entire point). The account balance tree retains the necessary information, which is secured by the unpruned (i.e. "eternal") proof chain and a recent history ("sliding window") of transactions.

P.S. The following comments are stuck in moderation queue, so I throw them here in case they never appear there:

http://blog.mpettis.com/2013/10/hidden-debt-must-still-be-repayed/#comment-3203

Indeed it appears the outcome in the USA will be politically decided. If the government is not successful in convincing the broad populace to backstop the $quadrillion of derivatives of the too big to fail banks, then the writedown will be charged mostly to investors. Whereas, if via the growing socialism movement, the populace can be convinced to accept $trillions in bail-ins and $17 trillion in retirement plan nationalizations, then the broad populace will pay for the writedown.

I can cite the official G7 government website plans for the bail-ins which stipulate that writing down trading losses (e.g. derivatives) takes precedence over bondholders and depositors; and the discussion of the $17 trillion retirement nationalization has reached official agency level already. Also I cite references on the well documented theory that Obama refused to allow continuing funding proposals during the recent government shutdown in order to enrage the broad populace and insure the democrats win the Congress in 2014, thus giving them the power to carry out these plans and to raise taxes (“tax the rich” which really means the middle class and small business) significantly. Giving traitor Boemer, the Tea Party has split from the Republican party which is now disintegrating.

Europe is already well along this socialism path as Spain recently added a tax on sunlight and France recently made it illegal to shutdown a company that is unprofitable, thus forcing the company to increase debt perpetually.

Google “Some Iron Laws of Political Economics” to understand why socialism can’t retreat without a Minsky moment chaos.

http://blog.mpettis.com/2013/10/hidden-debt-must-still-be-repayed/#comment-3179

The solution to China’s debt spiral is the same as the solution to utilizing the FX reserves most efficiently by increasing imports– liberalize the economy so decentralized fitness[1] of private investment can provide (investment and employment) opportunities for the home sector and thus consumption to rise. The export and housing sectors are heavily subsidized and pushed to overinvestment (and oversubscription of available resources) by centralized policy and crony ownership.

[1] I’ve explained fitness in terms of simulated annealing and degrees-of-freedom in past blog comments, and a simpler way of visualizing it is that small things grow faster, i.e. selling cold water on a hot day can double or triple capital, yet a billionaire can never do that in a day.

Correct me if I am wrong, but China’s debt spiral hasn’t peaked yet thus adjustment hasn’t begun in context of a Minsky moment that ALWAYS occurs at the peak (i.e. China’s solution to prior debt crisis was not a peak, rather an extension to enable debt to continue to grow). China can’t make such a drastic shift without chaos (i.e. a transfer from crony sector to write-down the debt), and chaos won’t be accepted willingly. So will China slow grind while increasing debt perpetually as Japan did for 23 years, or will it have a Minsky moment sooner forcing it into chaotic adjustment? I would love to see an article that explored the differences between Japan and China towards understanding the factors. Japan can’t continue to increase debt forever, thus a Minsky moment must eventually occur.

I again take issue with Michael’s repeated contention that the USA has adjusted. The banks have not been recapitalized because they are sitting on a $quadrillion of derivatives that are going to blow up ostensibly when Europe, China or Japan does. It was the default of Rothschilds’ small bank in Austria that set off the contagion of World War 1, so it may not even require one of the major economies to blow up. Debt continues to increase globally and the USA is no exception.

Michael, how do 300+% debt-to-GDP levels (with a $quadrillion of credit swap derivatives as the enabler) for the entire world resolve in historically. Every one with a noodle should understand there is going to be massive chaos ahead and there is no solution that can avoid that Minsky moment. What am I missing that causes you to think the USA has adjusted or recapitalized? The socialism and debt is increasing everywhere, no write-downs or peaks have been achieved except perhaps in Iceland.

P.S. Michael thanks for clarifying that you desire comments. I was contemplating if you had turned them off intentionally.

[digitalindustry]

Add:

4. Remove the capability for the private banks to create base money out-of-thin air when they issue loans on reserves:

http://en.wikipedia.org/wiki/G._Edward_Griffin#The_.22Mandrake_mechanism.22

Of course they may still be able (if not illegal) to write more receipts for deposits, than they have reserves, but they won't actually be able to create base cryptocurrency money, thus bank runs and defaults should be more frequent and self-correcting (as they were in the 1800s on a gold base money with gold certificates as receipts for deposits). The subversion is if the receipts begin trading as currency (e.g. Ripple currency) and are more widely accepted than the cryptocurrency base money, which I guess is what happened near the end-game of the 1800s.


+1

Now you make more sense anonymint.

Ripple is essentially designed for this purpose,  but actually it serves no purpose, where as in an old analog system ripple could actually serve a purpose,  its a paradox of sorts,  it reminds me a little of the zeitgeist paradox I identified.

For example break down the headline just basic support for this movement and you will find a large demographic in post what i would call " post cocommunists baby boomers" , what im trying to state badly is , those generations after the " communist baby boomers" .

So we have these supporters , of the zeitgeist movment , but wait for it :

Without "multidimensional information" ,  a  the zeitgeist movement would not exist,  but also without "multidimensional information"  the zeitgeist movement may have been very large , but because of it primary reason for existance is also the reason for its failure.

So we have this effect you see.

One in fact Tesla predicted,  maybe the genius of all humans?

Everything you wrote here that you think it makes sense ... it doesn't.

Thats a relief,

  I was starting to think over it and feel it made perfect sense.

[digitalindustry]

When pruning an old block, for which fees have already been paid, the transactions will be included for free in the new block, at the cost of the current effort minus current fees.

How can then the mini-blockchain offer "lower fees" if more effort is needed for the same reward?

The pruned transactions are discarded and not added to new blocks (otherwise how would we shrink the blockchain which is the entire point). The account balance tree retains the necessary information, which is secured by the unpruned (i.e. "eternal") proof chain and a recent history ("sliding window") of transactions.

P.S. The following comments are stuck in moderation queue, so I throw them here in case they never appear there:

http://blog.mpettis.com/2013/10/hidden-debt-must-still-be-repayed/#comment-3203

Indeed it appears the outcome in the USA will be politically decided. If the government is not successful in convincing the broad populace to backstop the $quadrillion of derivatives of the too big to fail banks, then the writedown will be charged mostly to investors. Whereas, if via the growing socialism movement, the populace can be convinced to accept $trillions in bail-ins and $17 trillion in retirement plan nationalizations, then the broad populace will pay for the writedown.

I can cite the official G7 government website plans for the bail-ins which stipulate that writing down trading losses (e.g. derivatives) takes precedence over bondholders and depositors; and the discussion of the $17 trillion retirement nationalization has reached official agency level already. Also I cite references on the well documented theory that Obama refused to allow continuing funding proposals during the recent government shutdown in order to enrage the broad populace and insure the democrats win the Congress in 2014, thus giving them the power to carry out these plans and to raise taxes (“tax the rich” which really means the middle class and small business) significantly. Giving traitor Boemer, the Tea Party has split from the Republican party which is now disintegrating.

Europe is already well along this socialism path as Spain recently added a tax on sunlight and France recently made it illegal to shutdown a company that is unprofitable, thus forcing the company to increase debt perpetually.

Google “Some Iron Laws of Political Economics” to understand why socialism can’t retreat without a Minsky moment chaos.

http://blog.mpettis.com/2013/10/hidden-debt-must-still-be-repayed/#comment-3179

The solution to China’s debt spiral is the same as the solution to utilizing the FX reserves most efficiently by increasing imports– liberalize the economy so decentralized fitness[1] of private investment can provide (investment and employment) opportunities for the home sector and thus consumption to rise. The export and housing sectors are heavily subsidized and pushed to overinvestment (and oversubscription of available resources) by centralized policy and crony ownership.

[1] I’ve explained fitness in terms of simulated annealing and degrees-of-freedom in past blog comments, and a simpler way of visualizing it is that small things grow faster, i.e. selling cold water on a hot day can double or triple capital, yet a billionaire can never do that in a day.

Correct me if I am wrong, but China’s debt spiral hasn’t peaked yet thus adjustment hasn’t begun in context of a Minsky moment that ALWAYS occurs at the peak (i.e. China’s solution to prior debt crisis was not a peak, rather an extension to enable debt to continue to grow). China can’t make such a drastic shift without chaos (i.e. a transfer from crony sector to write-down the debt), and chaos won’t be accepted willingly. So will China slow grind while increasing debt perpetually as Japan did for 23 years, or will it have a Minsky moment sooner forcing it into chaotic adjustment? I would love to see an article that explored the differences between Japan and China towards understanding the factors. Japan can’t continue to increase debt forever, thus a Minsky moment must eventually occur.

I again take issue with Michael’s repeated contention that the USA has adjusted. The banks have not been recapitalized because they are sitting on a $quadrillion of derivatives that are going to blow up ostensibly when Europe, China or Japan does. It was the default of Rothschilds’ small bank in Austria that set off the contagion of World War 1, so it may not even require one of the major economies to blow up. Debt continues to increase globally and the USA is no exception.

Michael, how do 300+% debt-to-GDP levels (with a $quadrillion of credit swap derivatives as the enabler) for the entire world resolve in historically. Every one with a noodle should understand there is going to be massive chaos ahead and there is no solution that can avoid that Minsky moment. What am I missing that causes you to think the USA has adjusted or recapitalized? The socialism and debt is increasing everywhere, no write-downs or peaks have been achieved except perhaps in Iceland.

P.S. Michael thanks for clarifying that you desire comments. I was contemplating if you had turned them off intentionally.

Because you are coming to understand the debt=currency relationships,  debt continues to rise labor becomes redundant,  its similar in degrees to crypto difficulty,  will labor continue as incentives approach 0.

[gatra]

if I disconnected for a week (or whatever the length of the minichain), then when I connect i have to download a full new chain. If I'm shown more than one by different nodes, which one do I choose? the one with more work? what if the diff went down? I could end up downloading an old chain...

[AnonyMint]

if I disconnected for a week (or whatever the length of the minichain), then when I connect i have to download a full new chain. If I'm shown more than one by different nodes, which one do I choose? the one with more work?

Yes you trust the proof chain that has more difficulty. The proof chain is much more compact than Bitcoin's complete history of all transactions.

If there is a (50+%, thus not likely) secret chain attack, then you need to refer to more complete history of transactions saved by the community.

what if the diff went down? I could end up downloading an old chain...

What is the "diff"? What do you mean "old chain"?

[gatra]

What is the "diff"? What do you mean "old chain"?

By diff I mean the difficulty. Imagine this scenario:
Let's the minichain has 1 week worth of blocks. In week 1, network difficulty was set to a number which we'll call d1. And nodes A and B are connected during week 1 and then disconnect.
During week 2, nodes A and B are not connected. Also, for some reason some nodes disconnect too (let's say week 2 is vacations in Silicon Valley, this is not crazy, bitcoin difficulty has a trend of going up but sometimes it oscilates a bit), making the difficulty of week 2 go down. So d2 < d1.
Now, when nodes A and B connect to the network on week 3, they have a minichain of week 1 (the "old chain") which has more work, more difficulty, than the rest of the network which has ONLY the blocks of week 2. If nodes A and B see each other they will fork, not accepting the good minichain.
So you can't choose based on difficulty. But you can't choose based on timestamp, because those are easy to forge. You must do some combination when deciding which is the valid minichain.

Also, and worst, if I want to create a fake minichain for attacking, I could spend months or even a couple of years creating the minichain of one week. A hardcoded genesis block prevents this, and forces me to start from a fixed point, but new blocks are added to the end of the valid chain all the time. If you don't have this, a 50% attack can create a minichain in 1 week, but a 25% attack could create one in 2 weeks, and so on, a 6.25% attack could create a whole fake minichain in 2 months.


I like the idea, I'm just pointing out that there are many things to have in mind and it may be tricky to make it work.

[bitfreak!]

Now, when nodes A and B connect to the network on week 3, they have a minichain of week 1 (the "old chain") which has more work, more difficulty, than the rest of the network which has ONLY the blocks of week 2. If nodes A and B see each other they will fork, not accepting the good minichain.

The entire "chain" can be thought of as the proof chain + the mini-blockchain. What you seem to be forgetting here is the proof chain. The first thing nodes A and B will do is update their proof chain (every node has a full copy of the proof chain because it's tiny), and it's the proof chain which is used to calculate the cumulative difficulty of the entire chain.

[gatra]

oh, I get it, you're right
It's interesting, but I still don't completely understand how everything fits together, I need to read the pdf a couple of times...