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Author Topic: Does Namecoin solve the backing problem?  (Read 2211 times)
BeeCee1
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June 23, 2011, 01:31:07 AM
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There are regular threads here about how bitcoin isn't backed by anything, generally followed by a plan to back it with gold or silver or dollars, however, every one of those plans relies on a central authority.  This doesn't work since that central authority is subject to bankruptcy, corruption, and government influence.

In order to keep the distributed nature of bitcoin you would have to back it by something that is itself virtual.  That got me thinking that maybe Namecoin is really a backed virtual currency.  Even if the dollar/bitcoin/whatever value of namecoin went to zero, you'd still be able to use it for something. Currently, that something is registering domains but it is set up to allow you to store name/value pairs.  This makes NameCoin a currency that is backed by the right to use a distributed data store, pretty interesting.
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June 23, 2011, 01:54:02 AM
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BitCoin is equally backed by the right to enter transactions into the hash chain which is also a distributed data store. Remember, you can transfer any amount of BitCoins to any address you want, whether or not that address actually corresponds to a private key anyone holds.

For example, say I want a provable timestamp of a document. I can hash the document and transfer .0001 BTC to that hash. This proves that the holder of the private key the BTC was transferred from had that document at the timestamp in that block. And at no cost to me, that will continue to acquire more and more confirmation.


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June 23, 2011, 01:57:22 AM
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BitCoin is equally backed by the right to enter transactions into the hash chain which is also a distributed data store. Remember, you can transfer any amount of BitCoins to any address you want, whether or not that address actually corresponds to a private key anyone holds.

For example, say I want a provable timestamp of a document. I can hash the document and transfer .0001 BTC to that hash. This proves that the holder of the private key the BTC was transferred from had that document at the timestamp in that block. And at no cost to me, that will continue to acquire more and more confirmation.



I can think a million uses for this. Actually not really.
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June 23, 2011, 02:01:53 AM
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I can think a million uses for this. Actually not really.
It only takes one good one. The cost is really low, and the distribution and persistence is beyond what's available from almost any other source. (That said, I can't think of one really good one either.)

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June 23, 2011, 02:02:32 AM
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There are regular threads here about how bitcoin isn't backed by anything, generally followed by a plan to back it with gold or silver or dollars, however, every one of those plans relies on a central authority.  This doesn't work since that central authority is subject to bankruptcy, corruption, and government influence.

In order to keep the distributed nature of bitcoin you would have to back it by something that is itself virtual.  That got me thinking that maybe Namecoin is really a backed virtual currency.  Even if the dollar/bitcoin/whatever value of namecoin went to zero, you'd still be able to use it for something. Currently, that something is registering domains but it is set up to allow you to store name/value pairs.  This makes NameCoin a currency that is backed by the right to use a distributed data store, pretty interesting.

Backing (as well as intrinsic value) is a liability for money, not an asset.  It artificially pins the value of the money-units to something other than what the market would reach absent the backing, or it artificially influences the value of the backing asset. E.g. in the case of gold— gold is orders of magnitude more expensive than other substances which are more rare, more difficult to obtain, and more industrially useful— thus leading to an inefficient under-utilization of gold.

The parallel with name backing is pretty obvious: If you fuse naming and bitcoin either names will be wildly under/overpriced due to demand for bitcoin, or bitcoin will be wildly under/overpriced due to demand for names, or both.

This article changed how I thought about money by arguing about why gold is not great money. Perhaps you'll find it interesting: http://www.libertariannews.org/2011/06/21/against-the-gold-standard/

I would instead argue that when people think of backing as a problem what they are really concerned with is guaranteed liquidity. Unfortunately, even if we made it so you could always buy names with bitcoin (perhaps with an automatic variable exchange rate to avoid the backing problems I suggested above) it wouldn't really solve the liquidity problem because you might want something _other_ than names, like food. And if you were having problems getting people to accept bitcoin for food then you're going to have pretty much the same problem with bitcoin-connected names for food.

I don't buy the bitcoin-backed-by-proven-transactions.  I thought I might need certify a document creation time at some point in the future the other day so I dropped a SHA-512 randomly into #bitcoin where is was logged by hundreds of disinterested parties. Should I actually need to prove it I could just subpoena a few of them. I can cheaply put a hash in a newspaper classified, etc.  Timestamping is so cheap that its almost valueless on its own, and the cases where you'd need machine verifiable timestamps that bitcoin provides over and above the cheap options I just gave are few and far between.

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June 23, 2011, 02:07:31 AM
 #6

BitCoin is equally backed by the right to enter transactions into the hash chain which is also a distributed data store. Remember, you can transfer any amount of BitCoins to any address you want, whether or not that address actually corresponds to a private key anyone holds.

For example, say I want a provable timestamp of a document. I can hash the document and transfer .0001 BTC to that hash. This proves that the holder of the private key the BTC was transferred from had that document at the timestamp in that block. And at no cost to me, that will continue to acquire more and more confirmation.


If your document happens to hash to a valid bitcoin address.

Since your keys have to be in a particular format you are pretty limited, namecoin has a more flexible way of storing data which makes it suitable for a larger number uses.  
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June 23, 2011, 02:26:40 AM
 #7

BitCoin is equally backed by the right to enter transactions into the hash chain which is also a distributed data store. Remember, you can transfer any amount of BitCoins to any address you want, whether or not that address actually corresponds to a private key anyone holds.

For example, say I want a provable timestamp of a document. I can hash the document and transfer .0001 BTC to that hash. This proves that the holder of the private key the BTC was transferred from had that document at the timestamp in that block. And at no cost to me, that will continue to acquire more and more confirmation.


If your document happens to hash to a valid bitcoin address.

Since your keys have to be in a particular format you are pretty limited, namecoin has a more flexible way of storing data which makes it suitable for a larger number uses.  

bitcoin script has means for putting arbitrary data on the stack.  You can embed any data you want into a script and the block chain will act as a permanent proof-of-record for you.  Your document doesn't have to hash to a bitcoin address to do this.

That being said, you can put anything you want into a bitcoin address, even if you don't know the public key that would hash to it.  So you could put any data you wanted to that would fit into 160 bits.  If the hash of your document did, that's all you need.

Or maybe someone can correct me if I am wrong.
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June 23, 2011, 02:30:30 AM
 #8

There are regular threads here about how bitcoin isn't backed by anything, generally followed by a plan to back it with gold or silver or dollars, however, every one of those plans relies on a central authority.  This doesn't work since that central authority is subject to bankruptcy, corruption, and government influence.

In order to keep the distributed nature of bitcoin you would have to back it by something that is itself virtual.  That got me thinking that maybe Namecoin is really a backed virtual currency.  Even if the dollar/bitcoin/whatever value of namecoin went to zero, you'd still be able to use it for something. Currently, that something is registering domains but it is set up to allow you to store name/value pairs.  This makes NameCoin a currency that is backed by the right to use a distributed data store, pretty interesting.


Trust is virtual.  If you have a bitcoin and somebody else is working to trade you something for it than it has value ... in this case the bitcoin cost is what you and who you trade with value what was trade.  That works with anything; currency, services, products etc.  Further, trading bitcoins for a physical ounce of gold today, while not tied to any currency does give you a spot value of worth in any given currency as gold is priced in just about every currency in the world.  As long as people have trust in transactions and trust that bitcoins can't be counterfeited (thus inflated), then virtual or not it has value.  Really, what backs the USD?  What backs gold?  Gold only has value because people desire it for various reasons such as using it as a conductor, jewelry, beauty (that does not corrode) and extreme maleability, and if course as an investment (since it does have value).  Fiat currency is at an extreme disadvantage since it is also based on trust (except governments keep printing more which inflates or devalues all of the same currency proportionately).  People cannot trust their government not to print more money at will (thus stealing from those who have said currency).  There is no intrinsic value in the USD beyond the fact it is massively used in trade and traders (that would be everybody who uses USD) have faith that the dollar they received today can be spent as a dollar tomorrow and it will have very nearly the same value (so it is stable over the short term).  The U.S. government is letting it's citizens down however (and that includes me), because they are still openly printing new money and give it a nice name which makes it sound legitimate; "quantitative easing".  This is nothing more than stealing value from the USD market cap value (anybody who uses USD) and either giving it to institutions they want to support but otherwise had no money to do so and (not really or) devaluing a given quantity of USD.  Since the U.S. government us in debt up to it's eyeballs, this serves to devalue what they owe, so major lenders to the government are losing on any long term loans and the rest of the economy based on the USD will raise prices to compensate.  That can't really happen to bitcoin as there is no way to simply make more at no cost.  What to keep in mind though is that the initial bitcoin currency is still being "printed" via mining and thus value must be considered with that in mind, and thus trust (or faith) that their will be no sudden influx of new coins from nowhere causing devaluation like occurs with fiat currency.  The Mtgox fiasco where the price dropped to nearly zero (I never did check out the low price on that) was an emotional reaction where they lost faith and valued it themselves as not worth much and sold it.  If any would have thought even a moment about it, if 6% of all coins hit the market, why is there value any different to you?  They were there all the time, just not for sale.  It may cause a price swing if the person selling these valued them little and sold them at that value.  A temporary change if those who remain retain their trust in the value of the bitcoin.

Even without Mtgox reversing trades (blah!) the market has already shown that it values them in spite of that sell off.

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June 23, 2011, 02:51:54 AM
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[  What backs gold?  Gold only has value because people desire it for various reasons such as using it as a conductor, jewelry, beauty (that does not corrode) and extreme maleability,

I think you pretty much answered your own question here.

There is no intrinsic value in the USD beyond the fact it is massively used in trade and traders

There are some people who like backed money (money that has a applications outside of its use as currency, like gold/silver) and some people who are ok with unbacked fiat (like USD), It was probably a mistake for me to list USD as one of things that could be used to back an electronic currency.  The point I was trying to make was that NameCoin has the features of Bitcoin plus it has utility, that may make it acceptable to people who wouldn't be interested bitcoin.
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June 23, 2011, 02:58:44 AM
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I would instead argue that when people think of backing as a problem what they are really concerned with is guaranteed liquidity. Unfortunately, even if we made it so you could always buy names with bitcoin (perhaps with an automatic variable exchange rate to avoid the backing problems I suggested above) it wouldn't really solve the liquidity problem because you might want something _other_ than names, like food. And if you were having problems getting people to accept bitcoin for food then you're going to have pretty much the same problem with bitcoin-connected names for food.

Just to be clear, Namecoin has the features of bitcoin (since it is a fork of bitcoin) plus the distributed data store, you wouldn't back bitcoin with namecoins, you would use namecoins instead of bitcoins.

It wouldn't completely solve the liquidity problem but it would help,  if you want something other than names, like food, and if you were having problems getting people to accept namecoin for food, you could sell it to someone who does want the naming feature and buy food with the proceeds.
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June 23, 2011, 03:05:05 AM
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I can think a million uses for this. Actually not really.
It only takes one good one. The cost is really low, and the distribution and persistence is beyond what's available from almost any other source. (That said, I can't think of one really good one either.)

Transferring 0.001 BTC would cost more in transaction costs that what was transferred; it wouldn't be at no cost.

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June 23, 2011, 03:10:51 AM
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Transferring 0.001 BTC would cost more in transaction costs that what was transferred; it wouldn't be at no cost.
If it was at no cost, it wouldn't back anything. The whole point is that it costs you, so you need bitcoins to do it.

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June 23, 2011, 03:11:28 AM
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If your document happens to hash to a valid bitcoin address.
Since your keys have to be in a particular format you are pretty limited, namecoin has a more flexible way of storing data which makes it suitable for a larger number uses.  
Every document hashes to a valid bitcoin address. A bitcoin address *is* the hash of a document.

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June 23, 2011, 07:11:49 AM
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If your document happens to hash to a valid bitcoin address.
Since your keys have to be in a particular format you are pretty limited, namecoin has a more flexible way of storing data which makes it suitable for a larger number uses.  
Every document hashes to a valid bitcoin address. A bitcoin address *is* the hash of a document.

Not if the hash in question is longer than 160 bits.
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June 23, 2011, 01:17:36 PM
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If your document happens to hash to a valid bitcoin address.
Since your keys have to be in a particular format you are pretty limited, namecoin has a more flexible way of storing data which makes it suitable for a larger number uses.  
Every document hashes to a valid bitcoin address. A bitcoin address *is* the hash of a document.

Not if the hash in question is longer than 160 bits.

Perhaps you misunderstand what I'm saying. I'm not saying every hash is a bitcoin address. I'm saying every document hashes to a bitcoin address. Yes, it's trivial to create hashes that are not bitcoin addresses, but that's not a problem so long as it is possible to hash every document to a bitcoin address -- and it is.

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June 28, 2011, 01:54:42 AM
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There are regular threads here about how bitcoin isn't backed by anything, generally followed by a plan to back it with gold or silver or dollars, however, every one of those plans relies on a central authority.  This doesn't work since that central authority is subject to bankruptcy, corruption, and government influence.

In order to keep the distributed nature of bitcoin you would have to back it by something that is itself virtual.  That got me thinking that maybe Namecoin is really a backed virtual currency.  Even if the dollar/bitcoin/whatever value of namecoin went to zero, you'd still be able to use it for something. Currently, that something is registering domains but it is set up to allow you to store name/value pairs.  This makes NameCoin a currency that is backed by the right to use a distributed data store, pretty interesting.


Interesting indeed. As far as just the domains go, is there any reason that Namecoin could not serve as a wholly alternate domain name system...and not just limited to .bit? If so, perhaps one could make a 'market cap' valuation argument, which would further support the 'backing' notion.
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June 28, 2011, 02:57:33 AM
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Interesting indeed. As far as just the domains go, is there any reason that Namecoin could not serve as a wholly alternate domain name system...and not just limited to .bit? If so, perhaps one could make a 'market cap' valuation argument, which would further support the 'backing' notion.

I don't think so.  Namecoin doesn't include the suffix, .bit is just a convention.  Of course, since it can store arbitrary key value pairs and the key portion has a specifier you could create a new, slightly different DNS that did have suffixes.  That would probably cause more confusion than it is worth though.
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June 28, 2011, 07:19:18 AM
 #18

Quote
For example, say I want a provable timestamp of a document. I can hash the document and transfer .0001 BTC to that hash. This proves that the holder of the private key the BTC was transferred from had that document at the timestamp in that block. And at no cost to me, that will continue to acquire more and more confirmation.

Why store mere hashes of your document when you could split the entire document over multiple addresses/payloads/transfer amounts/timestamps.  Just in the address + (160 bit) payload, you have ~45 bytes of meaningful data.  Add in the source wallet address, transfer amount (which can be anything since you'd own the receiving wallet with this scheme) and timestamp (rounded to the nearest 5 minutes or so) and you have some bandwidth to store arbitrary data in.  Of course, namecoin itself is *much* more suited to this purpose.

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June 28, 2011, 07:42:26 AM
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Interesting indeed. As far as just the domains go, is there any reason that Namecoin could not serve as a wholly alternate domain name system...and not just limited to .bit? If so, perhaps one could make a 'market cap' valuation argument, which would further support the 'backing' notion.
Yes, namecoin is essentially a re-invention of RealNames , but decentralized and using bitcoin ideas:
Quote
In effect, to users of Internet Explorer, RealNames became a domain registry which was capable of registering names that worked without needing to belong to a top level domain such as ".com" or ".net". RealNames and its backers expected this to be a lucrative source of income, and it raised more than $130m of funding for its venture.
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June 28, 2011, 08:33:51 AM
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So what about using namecoin blockchain to record land/property title deed ownership?

The recent rush to centralise property/land ownership records in databases and obsolete land deed titles makes me nervous. (It's like pulling teeth if you ask the lawyer to see the actual title these days)

Not to mention avoiding all the shennigans that went during the mortgage debt boom, CDO's etc.

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