*old* BitShare Economic Theory 10 BTC bounty to prove me wrong... paid.

[bytemaster]

mining is irrelevant to the price of crypto-Gold.

So clearly, price changes in BitShares to result in changes in crypto-Gold

You just contradicted yourself.

I never said the price would track perfectly,  I said it would track within a range of +/- a couple of  a percent.  The change in BitShare price create a profit opportunity to correct the crypto-Gold price.

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[spiral_mind]

mining is irrelevant to the price of crypto-Gold.

So clearly, price changes in BitShares to result in changes in crypto-Gold

You just contradicted yourself.

I never said the price would track perfectly,  I said it would track within a range of +/- a couple of  a percent.  The change in BitShare price create a profit opportunity to correct the crypto-Gold price.

Mining definitely would have an effect on the price of BitShares because it increases the supply.
If supply increases but demand stays the same prices go down. That's the most basic economics possible.

You are basically just assuming that demand will automatically outpace supply at all times.
That's not going to happen. Bitcoin has been up and down so many times and survived it all.
Your system would collapse at the first hint of trouble. That's not going to thrive, it's going to die quickly.

So either a company screws themselves over or everyone voluntarily tries to keep the price at a certain peg even though it will make them lose money. Both are against the basics of market behavior.

[bytemaster]

mining is irrelevant to the price of crypto-Gold.

So clearly, price changes in BitShares to result in changes in crypto-Gold

You just contradicted yourself.

I never said the price would track perfectly,  I said it would track within a range of +/- a couple of  a percent.  The change in BitShare price create a profit opportunity to correct the crypto-Gold price.

Mining definitely would have an effect on the price of BitShares because it increases the supply.
If supply increases but demand stays the same prices go down. That's the most basic economics possible.
You are basically just assuming that demand will automatically outpace supply at all times. That's not going to happen. Bitcoin has been up and down so many times and survived it all.
Your system would collapse at the first hint of trouble. That's not going to thrive, it's going to die quickly.

So either a company screws themselves over or everyone voluntarily tries to keep the price at a certain peg even though it will make them lose money. Both are against the basics of market behavior.

No, that is not what I am assuming.   Even if the BitShare supply were constant, the price would fluctuate relative to Gold.   And earlier I showed how regardless of the price fluctuation between Gold and BitShares, eGold could peg crypto-Gold to gold (within +/- a few percent transaction fee).

As a result, it does not matter what BitShares do relative to Gold whether due to mining or a scary news article, eGold could maintain the peg.
 

[spiral_mind]

mining is irrelevant to the price of crypto-Gold.

So clearly, price changes in BitShares to result in changes in crypto-Gold

You just contradicted yourself.

I never said the price would track perfectly,  I said it would track within a range of +/- a couple of  a percent.  The change in BitShare price create a profit opportunity to correct the crypto-Gold price.

Mining definitely would have an effect on the price of BitShares because it increases the supply.
If supply increases but demand stays the same prices go down. That's the most basic economics possible.
You are basically just assuming that demand will automatically outpace supply at all times. That's not going to happen. Bitcoin has been up and down so many times and survived it all.
Your system would collapse at the first hint of trouble. That's not going to thrive, it's going to die quickly.

So either a company screws themselves over or everyone voluntarily tries to keep the price at a certain peg even though it will make them lose money. Both are against the basics of market behavior.

No, that is not what I am assuming.   Even if the BitShare supply were constant, the price would fluctuate relative to Gold.   And earlier I showed how regardless of the price fluctuation between Gold and BitShares, eGold could peg crypto-Gold to gold (within +/- a few percent transaction fee).

As a result, it does not matter what BitShares do relative to Gold whether due to mining or a scary news article, eGold could maintain the peg.
 

This is so stupid. Egold does not have infinite money. They can't always maintain a peg no matter what.

Just go ahead and dump all your money into logos, coding, etc, without a working system. You probably won't ever pay out your bounties anyway since you think you're just so smart (and convincing you is the required condition for payment).

I'll just report this thread and move on. Bye.

[bytemaster]

Because BitShares can be thought of as a claim on future Revenue.  The reason eGold could maintain a 'peg' is the same as traditional hedging works.

You decide you are going to mine Gold and that it will cost you $100 and 1 year to get it, so you 'pre-sell'  (aka short) your gold at $100 and then cover a year later when you produce it.

If the price of gold falls over the course of the year, then you just buy it at market price and keep your profits.  If it goes up, you have no losses.

Thus BitShares allow you to 'hedge' your position in BitShares and because you have a hedge, you are able to eliminate the effects of exchange rate changes over time.

[thezerg]

Zerg, you haven't convinced me things are unworkable, but you have provided the most challenging and innovative attacks that cause me to put on my thinking cap.  Thanks for hanging in on this discussion, send me your BTC address and I will drop you a 0.05 BTC tip for your efforts, you deserve one even though you haven't yet convinced me.

Ok .05 BTC is peanuts so here's my counter-offer.  If you truly value my challenging attacks to your system (and you know they DO take a LOT more time to think up then drawing a logo) then pay for them.  Every time I show an attack that illustrates any or some combination of:

1. a problem in your system that makes you change a rule or add a new one
2. a way to nearly zero the value of a crypto-currency
3. a way to force minting enough coins that gets me the lions share of the dividends.
4. a way to force crypto-Q to diverge from Q
5. a way to force the system to leave me with more BS and/or crypto-Q then I started with (aka to "make" money).

You pay me .25 BTC.  If I show attack A, and you modify the rules and I show attack A' which is just slightly different that's 2 attacks.  Imagine you're really writing the code, updating it, and releasing it every time, but instead of pwning you, all the coins and millions of dollars, I just get .25 BTC.

I post one attack at a time, and do not post another until I receive the .25BTC.  If you want to stop the process you must indicate so in this thread before paying me the .25BTC for the prior attack.  That way I won't post the next one when you want to quit. 

These payments go towards my claim on the 10BTC bounty.  But if you stop the process, you essentially agree that you're abandoning the project and pay me the rest.  But if I run out of ideas, I am not abandoning my claim... because of my previous discussed but not (yet) accepted by you ideas of why its broken.  If you obstinately reject one of my attacks, at my option I can "shelve" it for a time when you might recognize it, or I can simply realize that you are not actually willing to pay anything and so cut-my losses and stop posting attacks.

If you agree to these terms, please show your appreciation for my blockchain attack and start the games by sending .25BTC to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd


Cheers!

[bytemaster]

How to create a crypto-Gold with an anonymous backer:

First we need a dividend-paying crypto-currency like Bitcoin, which I shall call BitShares, the dividends can be paid from 50% of mining fees.
Next we need the ability to 'short' BitShares to issue a new crypto-Gold at the current exchange rate.
Next we need the ability to cover the 'short' by reversing the process by turning 1 crypto-Gold back into BitShares.

Next consider the business of eGold (shutdown in 2009), they allowed direct instant transfer of gold between accounts.  They made their money on transaction fees.  The problem they faced is that they were not anonymous and thus accused of supporting money laundering.    What if eGold could have issued a crypto-Currency that could be backed anonymously.  They could still make their money on transaction fees and as long as crypto-GOLD tracked the value of actual gold then people could trust it.   They wouldn't have to trust it as a 'promise to pay', but could trust it because they could see that its current 'dividend rate' was the proper multiple of the dividends paid to BitShares and therefore crypto-Gold was actually worth the same about as physical-Gold.

So how would eGold operate?  

Step 1: Acquire 1000 oz of Gold.
Step 2: Check the exchange rate of Gold vs BitShares
Step 3: Issue new crypto-Gold at the proper ratio of Gold vs BitShares.
Step 4: Anonymously promote that you will maintain the peg of crypto-Gold to Gold.
Step 5: Let others exchange crypto-Gold for Gold because it is currently at parity.
Step 6: When the value of Gold goes up in terms of BitShares by 10%
                  -  Sell 100% of your Gold and buy BitShares at the new exchange rate.
                  -  Use these new BitShares to issue new crypto-Gold at the new exchange rate.
                  -  Cover your old crypto-Gold shorts using the new crypto-Gold thus giving freeing your old BitShares
                  -  Buy gold with your old BitShares, you will end up with 10% less gold than you started with.
                  -  Everyone gains more faith in crypto-Gold...
Step 7:  When the value of Gold goes down in terms of BitShares by 10%
                  -  You can now use  9 BitShares to purchase crypto-Gold and free 10 Bit Shares of collateral.
                  -  You net 1 BitShare which you will hold incase the price goes back up.
                  -  Parity is maintained.

Step 8:  Maintain buy / sell orders between BitShares and crypto-USD on the market with enough spread to make a profit any time there is deviation from market prices.

Profit!

[cunicula]

Start with "Q would not track USD because ..."

You can't make this argument.

Q is not tied to any fundamental real world value.

It could begin tracking the price of mangoes, go on to track the price of USD, and end up tracking the price of excrement.

[bytemaster]

Zerg, you haven't convinced me things are unworkable, but you have provided the most challenging and innovative attacks that cause me to put on my thinking cap.  Thanks for hanging in on this discussion, send me your BTC address and I will drop you a 0.05 BTC tip for your efforts, you deserve one even though you haven't yet convinced me.

Ok .05 BTC is peanuts so here's my counter-offer.  If you truly value my challenging attacks to your system (and you know they DO take a LOT more time to think up then drawing a logo) then pay for them.  Every time I show an attack that illustrates any or some combination of:

1. a problem in your system that makes you change a rule or add a new one
2. a way to nearly zero the value of a crypto-currency
3. a way to force minting enough coins that gets me the lions share of the dividends.
4. a way to force crypto-Q to diverge from Q
5. a way to force the system to leave me with more BS and/or crypto-Q then I started with (aka to "make" money).


You pay me .25 BTC.  If I show attack A, and you modify the rules and I show attack A' which is just slightly different that's 2 attacks.  Imagine you're really writing the code, updating it, and releasing it every time, but instead of pwning you, all the coins and millions of dollars, I just get .25 BTC.

I post one attack at a time, and do not post another until I receive the .25BTC.  If you want to stop the process you must indicate so in this thread before paying me the .25BTC for the prior attack.  That way I won't post the next one when you want to quit.  

These payments go towards my claim on the 10BTC bounty.  But if you stop the process, you essentially agree that you're abandoning the project and pay me the rest.  But if I run out of ideas, I am not abandoning my claim... because of my previous discussed but not (yet) accepted by you ideas of why its broken.  If you obstinately reject one of my attacks, at my option I can "shelve" it for a time when you might recognize it, or I can simply realize that you are not actually willing to pay anything and so cut-my losses and stop posting attacks.

If you agree to these terms, please show your appreciation for my blockchain attack and start the games by sending .25BTC to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd

Cheers!

I will accept your terms because you seem to be very competent at finding things with a few, minor, tweaks to the clauses.

1) I have discussed many rules and sometimes your attacks violate an existing rule or a rule that you did not understand.  Pointing this out or clarifying an existing rule shall not count as a new rule.  If any other poster on this thread will agree with me that it is not a new rule, then I win, if no one will agree that it is an old-rule that you misunderstood... then you win.
2) Working the system with only transactions between yourself (no other people) is the only way to collect on #5, otherwise you would just be playing the market spreads to make money.
3) crypto-Q and Q will vary in price as the ratio of depositors / withdrawers changes and this is expected behavior.   You must show that given an honest anonymous 'backer' with a large fixed supply of Gold and a matching supply of BS and no new infusions of cash that has the intention of maintaining a peg of crypto-Gold within +/- 10% can be driven to bankruptcy provided they are intelligent about managing their spreads/margins.  
4) you must zero the value of crypto-Gold backed by the anonymous 'peg'.
5) you must mint enough crypto-Gold to get the lions share of the crypto-Gold dividends from the anonymous 'peg'.  
6) Your attack must assume all actors are rational profit-seekers.
7) Your attack must not be something that Bitcoin is also vulnerable to (51% etc).

* edit *   I want to clarify that I may choose to stop paying you without giving up on this idea.  It just means I do not believe your attacks are valid. Thus not paying you does not entitle anyone to the full bounty.


The purpose of the anonymous peg is simply to avoid the SIDS attack issue which is an entirely different area of discussion.  

Therefore, I will send you 0.25 BTC for your most recent attack.   Thanks for hanging around and helping out.

[thezerg]

Zerg, you haven't convinced me things are unworkable, but you have provided the most challenging and innovative attacks that cause me to put on my thinking cap.  Thanks for hanging in on this discussion, send me your BTC address and I will drop you a 0.05 BTC tip for your efforts, you deserve one even though you haven't yet convinced me.

Ok .05 BTC is peanuts so here's my counter-offer.  If you truly value my challenging attacks to your system (and you know they DO take a LOT more time to think up then drawing a logo) then pay for them.  Every time I show an attack that illustrates any or some combination of:

1. a problem in your system that makes you change a rule or add a new one
2. a way to nearly zero the value of a crypto-currency
3. a way to force minting enough coins that gets me the lions share of the dividends.
4. a way to force crypto-Q to diverge from Q
5. a way to force the system to leave me with more BS and/or crypto-Q then I started with (aka to "make" money).


You pay me .25 BTC.  If I show attack A, and you modify the rules and I show attack A' which is just slightly different that's 2 attacks.  Imagine you're really writing the code, updating it, and releasing it every time, but instead of pwning you, all the coins and millions of dollars, I just get .25 BTC.

I post one attack at a time, and do not post another until I receive the .25BTC.  If you want to stop the process you must indicate so in this thread before paying me the .25BTC for the prior attack.  That way I won't post the next one when you want to quit.  

These payments go towards my claim on the 10BTC bounty.  But if you stop the process, you essentially agree that you're abandoning the project and pay me the rest.  But if I run out of ideas, I am not abandoning my claim... because of my previous discussed but not (yet) accepted by you ideas of why its broken.  If you obstinately reject one of my attacks, at my option I can "shelve" it for a time when you might recognize it, or I can simply realize that you are not actually willing to pay anything and so cut-my losses and stop posting attacks.

If you agree to these terms, please show your appreciation for my blockchain attack and start the games by sending .25BTC to: 1CKeoT8vBDQDEpMHz5VAswV39pZJ2GTGYd

Cheers!

I will accept your terms because you seem to be very competent at finding things with a few, minor, tweaks to the clauses.

1) I have discussed many rules and sometimes your attacks violate an existing rule or a rule that you did not understand.  Pointing this out or clarifying an existing rule shall not count as a new rule.  If any other poster on this thread will agree with me that it is not a new rule, then I win, if no one will agree that it is an old-rule that you misunderstood... then you win.
2) Working the system with only transactions between yourself (no other people) is the only way to collect on #5, otherwise you would just be playing the market spreads to make money.
3) crypto-Q and Q will vary in price as the ratio of depositors / withdrawers changes and this is expected behavior.   You must show that given an honest anonymous 'backer' with a large fixed supply of Gold and a matching supply of BS and no new infusions of cash that has the intention of maintaining a peg of crypto-Gold within +/- 10% can be driven to bankruptcy provided they are intelligent about managing their spreads/margins.  
4) you must zero the value of crypto-Gold backed by the anonymous 'peg'.
5) you must mint enough crypto-Gold to get the lions share of the crypto-Gold dividends from the anonymous 'peg'.  
6) Your attack must assume all actors are rational profit-seekers.
7) Your attack must not be something that Bitcoin is also vulnerable to (51% etc).

* edit *   I want to clarify that I may choose to stop paying you without giving up on this idea.  It just means I do not believe your attacks are valid. Thus not paying you does not entitle anyone to the full bounty.


The purpose of the anonymous peg is simply to avoid the SIDS attack issue which is an entirely different area of discussion.  

Therefore, I will send you 0.25 BTC for your most recent attack.   Thanks for hanging around and helping out.

.25BTC incoming confirmed!

GAME ON!!! :-)    


Now let me put on my thinking cap.  ...Probably nothing until tomorrow...

[bytemaster]

Start with "Q would not track USD because ..."

You can't make this argument.

Q is not tied to any fundamental real world value.

It could begin tracking the price of mangoes, go on to track the price of USD, and end up tracking the price of excrement.

Ok, the introduction of 'Q' is only confusing the issue.   As a result I would like all further discussion to *assume* that there exists a company (eOil) that holds 10,000 barrels of oil as well as enough BS to buy 10,000 barrels of oil.   eOil wants to generate a new currency called crypto-Oil and thus wants to peg the price of oil to crypto-Oil.     I chose oil only because it is more 'divisible' than gold, but you could also assume an infinitely divisible supply of gold.  

Next, assume this company is attempting to peg  crypto-Oil to the price of Oil... now drive this company out of business.

[bytemaster]

Until I post otherwise, the offer I made to thezerg is open for all takers.

If you also propose a 'fix' for your attack at the same time that you present the attack, and I accept the fix then I will double the reward and pay 0.5 BTC instead of .25 BTC.

[bytemaster]

Rules of Operation for the Anonymous Peg Company:

They only sell their crypto-Oil for a 1% premium above current market price.
They only buy their crypto-Oil at 1% below current market price.
They only 'issue' new crypto-Oil at market price.

[ISAWHIM]

If you have to go into that much explanation, just to get people to understand it... (And I am not seeing any advantage, just more overhead.)...

Than it might not be worth the added effort.

Perhaps you should work on the shortcomings of the existing coin, instead of just adding more complexity to an overly complex idea that has had almost every "complexity" bypassed, and thus, nullified of its original intent... Thus making it all overhead, just to operate it and keep it sustained.

Just my 2-cents...

Issues with the current system...
1: Originally based off, "luck" to encourage competition. Just discouraged everyone, so they made pools, which defeated luck. Thus, wasted overhead. (Also led to the discovery of the 51% attack.)
2: Horrible exponent curve for "reward", leaving little to offer past eight years of mining, unless fees are driven-up to near-rape-costs, just to convince someone to process an actual transaction in the future. Thus, no-one will want to waste time processing orders for dirt.
3: Failure to think ahead about "network issues"... When the future is down to the top three "controllers/bankers"... they will have to process EVERY SINGLE TRANSACTION each... (Only 3 confirms, unless they do it twice, thus, wasted overhead. There will not be 6, because 3 will barely make money, and less than 3 results in the 4th issue below.) That is a LOT of high-speed networks and "centralized control", with high overhead, and many offices in many countries, needed for each of the three top guys!
4: There must be three, or you get an unbalanced and unavoidable 51% self-attack that can never be corrected by the other. If one of those three goes down, the entire network has to shut down, or results in a 51% self-attack again...
5: Reward system is setup to completely crush any lesser individuals (the majority), who "created" the system. As opposed to just rewarding those for the efforts they actually expend. (Individuals, not machines. Machine advancement = less effort that results in more work, thus, reverse of realistic acceptable and logical intention.)
6: Reversibility, Trust-limited-transactions, and Corrections. (You actually tackle some of that.) Not that it should be FORCED, but it should be AVAILABLE.
7: Actual accounts, for those who want to "work in the confines of the 'legal-system', without penalty"... Again, AVAILABLE, but not FORCED.
8: Solidity... Something that limits rewards, IF transaction-fees are supplemented... Thus, stopping market-flooding of dead-earned credits that just cause a liquid market that screws with people's desire to use it, for anything other than a pump-n-dump or paper-trader-market. (Like gold and silver.) And/or takes "transaction quantity/volume" into that formula of reward.

Might want to have an ACTUAL market-study done on your "modifications", before you spend all this time developing something that is just going to amplify the bad, and turn itself into a self-sacrificing currency. (Like bitcoins are destined to become, in the not so distant future.)

EG, Building YOUR system off THIS system, is like using monopoly money as your base-line for a "system"... It just won't work in this aspect.

[bytemaster]

If you have to go into that much explanation, just to get people to understand it... (And I am not seeing any advantage, just more overhead.)...

Than it might not be worth the added effort.

Perhaps you should work on the shortcomings of the existing coin, instead of just adding more complexity to an overly complex idea that has had almost every "complexity" bypassed, and thus, nullified of its original intent... Thus making it all overhead, just to operate it and keep it sustained.

Just my 2-cents...

Issues with the current system...
1: Originally based off, "luck" to encourage competition. Just discouraged everyone, so they made pools, which defeated luck. Thus, wasted overhead. (Also led to the discovery of the 51% attack.)
2: Horrible exponent curve for "reward", leaving little to offer past eight years of mining, unless fees are driven-up to near-rape-costs, just to convince someone to process an actual transaction in the future. Thus, no-one will want to waste time processing orders for dirt.
3: Failure to think ahead about "network issues"... When the future is down to the top three "controllers/bankers"... they will have to process EVERY SINGLE TRANSACTION each... (Only 3 confirms, unless they do it twice, thus, wasted overhead. There will not be 6, because 3 will barely make money, and less than 3 results in the 4th issue below.) That is a LOT of high-speed networks and "centralized control", with high overhead, and many offices in many countries, needed for each of the three top guys!
4: There must be three, or you get an unbalanced and unavoidable 51% self-attack that can never be corrected by the other. If one of those three goes down, the entire network has to shut down, or results in a 51% self-attack again...
5: Reward system is setup to completely crush any lesser individuals (the majority), who "created" the system. As opposed to just rewarding those for the efforts they actually expend. (Individuals, not machines. Machine advancement = less effort that results in more work, thus, reverse of realistic acceptable and logical intention.)
6: Reversibility, Trust-limited-transactions, and Corrections. (You actually tackle some of that.) Not that it should be FORCED, but it should be AVAILABLE.
7: Actual accounts, for those who want to "work in the confines of the 'legal-system', without penalty"... Again, AVAILABLE, but not FORCED.
8: Solidity... Something that limits rewards, IF transaction-fees are supplemented... Thus, stopping market-flooding of dead-earned credits that just cause a liquid market that screws with people's desire to use it, for anything other than a pump-n-dump or paper-trader-market. (Like gold and silver.) And/or takes "transaction quantity/volume" into that formula of reward.

Might want to have an ACTUAL market-study done on your "modifications", before you spend all this time developing something that is just going to amplify the bad, and turn itself into a self-sacrificing currency. (Like bitcoins are destined to become, in the not so distant future.)

EG, Building YOUR system off THIS system, is like using monopoly money as your base-line for a "system"... It just won't work in this aspect.

Thanks for joining the discussion with some very good problems that could also be an improvement over BitCoin.   I have thought about ways to address some of those issues in the new blockchain, but the point is really moot if someone can prove that the fundamental purpose of BitShares (crypto-Gold) does not work.   That said here are some of the other 'updates' I would am considering to solve your issues:

0) Include a hash of the 'currency contract' in the genesis block that outlines what things the developers *may not change* without forking a new crypto-currency.
1) Define the block-chain to be a fixed-bandwidth / block-size maximum.  The result of this change would naturally limit the available transactions and thus make 'transactions' more valuable.  This would drive up dividends and push more transactions 'off-chain' where they belong while keeping things decentralized. 
       - ideally most transactions will move to OpenTransactions servers hosted behind BitMessage and OT servers would use BitShares to bail in / out of crypto currencies.
2) Native support for transferring value to and from a parallel chain.  This would allow many 'sub-chains' to interact with one another through nodes that join 2 or more chains, but no node would have to join more than 1 chain.   This would allow non-linear scalability with automatic load-balancing between the parallel chains based upon transaction fees / dividends.

     - BitShares makes support for parallel chains workable based entirely upon transaction fees.  The smaller chains would have lower transaction volume but require a trade to move value between the two chains.  Thus if BitShares ever became 'overloaded' it would just split and HARM NO ONE.   In fact, because the values in any one BitShare network track 'gold' or 'silver' then it doesn't matter what the price of a BitShare is and multiple BitShare networks could be set up provided there was market demand for it.  This would scale much better and far more decentralized than BitCoin ever will be.


3) Block-chain history compression by including the hash of a list of all unspent outputs in the merkel tree.  Nodes could drop the complete transaction history and only hold the unspent outputs.  This would greatly reduce the size of the block chain.

4) Define a new hashing algorithm that is RAM intensive, ram is already a very expensive specialized asic (transistors) and thus asics would only be able to optimize a small percent of the transistor count required to perform the hash algorithm.  Thus hashing power is controlled more by transistor count than processor architecture.

5) Cause each transaction fee to reduce the mining reward by 50% of the fee.  Thus as transaction fees increased the mining reward would naturally fall toward 0, combined with the fixed block size and ability to fork off new chains once one chain reached capacity would probably eliminate the need for 'arbitrary' mining reward reductions.

6) Reversibility is a no-go... it requires a central authority.  If you want that there are off-chain approaches or multi-sig support already.

[bytemaster]

Attacks that I find do not collect bounty...:

Assuming I have 50% of the hashing power... what can I do?
  I can delay all transactions...
  I can delay potential bids from being placed into the chain...
  I can pick winners / losers for matching bids... half of the time.
 
  The market response:  increase bid/ask spread to account for the delays.
  Attacker benefits:   they could have better arbitrage opportunities.
  Trader Response:   add more hashing power so you can gain the advantage.
  Net Result:  Arms race among professional traders to add hashing power to gain an advantage... thus making 50% attack even harder.

Assuming there is someone out there attempting to peg crypto-Gold to gold.. how can I screw them up?
  1) To issue new crypto-gold I would have to out-bid them, thus pushing the value of crypto-gold up... no real complaints from the holders and buying opportunity for the peg who would profit from it.  In theory there is no limit to how *high* I could push crypto-gold above the gold price.   The peg would make a ton of money from the extra dividends he was receiving from the attackers over-priced issuance.   The attacker wouldn't be able to redeem their 'short positions' for a profit and thus face an ongoing opportunity cost until they admit their losses.  

  2) To cause the value of crypto-gold to fall below parity they would have to sell crypto-gold.  To sell crypto-gold they must first acquire it and the only way to acquire it is to mint above market price or have bought it from the peg.  If they bought from the peg, then they paid 1% above market price.   I suppose the peg would have to 'buy' at market price or it would give the attacker an opportunity to mint below market price.   * I will have to change the business plan of the peg * as a result... this doesn't change the rules of the block-chain though.  

[bytemaster]

After considering the business plan of the Peg... I theorize that a single individual with only a hand full of very divisible coins would be able to maintain the peg and profit from it assuming they could be efficient enough with their off-chain buying/selling of gold for BitShares.   

I then theorize that everyone in the market would be competing to make profits using the same model as the peg, and thus whoever was most-efficient with off-chain BitShare/gold transactions would make all of the money.  Because of the efficiency gains of the most profitable peg, it would drive down the spread between buying and selling crypto-Gold.

[ISAWHIM]

3) Block-chain history compression by including the hash of a list of all unspent outputs in the merkel tree.  Nodes could drop the complete transaction history and only hold the unspent outputs.  This would greatly reduce the size of the block chain.

That ONE thing there, would make it illegal for use in the USA. (Destroying a history of transactions.) Being a MINTER, will require these records also. Unless you don't intend to allow people to use actual "bank notes" (currency), to be exchanged for the virtual currency.. but without a "central authority", you have no control over how, and who uses it... thus, it will legally be assumed it IS being exchanged, and that individual IS a minter, and they ARE legally responsible for exchanges and distribution of mined "exchangeable note currency", and the records of the exchanges, to operate in the USA, legally.

Reversibility does not need a "central authority"... Giving a USER the ABILITY to REVERSE a transaction SENT to THEM... (Return = non-taxable proof of "no-earnings".) They decide if they want to reverse/refund a transaction to THEM... Otherwise it looks like more income to the other person, and to you, and you BOTH have to pay taxes for income that was not actually made. (To also provide proof in the "List of non-deleted transactions", in the event of "being summoned to a court of law", which will require unaltered proof of that transaction, up to 20 years later.)

Oh, I see... you want to use only foreign investors that "Are not part of the United Nations Agreements"... Then continue... lol...

[ISAWHIM]

You also forget, it is the "marketers" who decide what the "value" is... and you have no control over that.

This can be pumped-and-dumped like all the other markets. You just buy your own overpriced coins on your own exchange, paying the fees which will be marginal to your rewards, to make it look legitimate. (Thus, the actual records would be shown, but the history would be "erased" by your "compression of removing transactions and keeping balances". Like what they do with bitcoins now, through the exchanges of unlinked transactions/accounts. Only coins sent through an exchange change the "value" of the exchanges charts. A private sale would not be tied to a monetary-exchange, and thus, hold no "market-altering-value".)

A marketer simply has to lie, and SAY the listing "value" is higher, or lower than it actually is, stopping you from listing lower than that price for a sale, thus, making you list a higher price, which makes room for their pump-and-dump coins to be injected and purchased from themselves. What so you think that spike in the market was, where coins were sold for $250... That was the marketers pushing the listing value up, so they could sell the coins they held at $200 per coin... Then the market came back to reality.

P.S. Being RAM dependent is NOT sufficient... Ram is cheap, hard-drives are TB's of virtual-ram, and "Web-servers" have more RAM, in-hand, than you could possibly fathom. However, that will slightly HINDER the ASICs... it will be only a fraction of the hindrance you imagine, as they are plugged-in to a "computer with ram". "Proof of work" is a neat concept, but a waste of power. Proof should be actual transactions, not useless "coin creation". (That should be a reward for "transaction processing", when No transaction fees are present... Like for refunds/reversals/moving-funds-to-your-other-accounts.)

[ISAWHIM]

Seems like you are just trying to re-invent "paper-trading" of gold and silver... which is a failure that is killing china at the moment, and was banned in the USA.
http://www.zerohedge.com/article/trading-over-counter-gold-and-silver-be-illegal-beginning-july-15

Paper-trading = Trading values of gold, without having the gold present or available. (Trading with easily manipulated "margin calls", that only reward the exchanges that trade, which are unregulated.)

Again, you are just adding unregulated complexity to a screwed-up base-line system, that is just going to screw it up even more. Just program yourself an "exchange"... Use any available input of currency-types...
All the alt-coins (Bitcoin, litecoin, feathercoin, terracoin, mincoin, namecoin, devcoin, bbqcoin, freicoin, goldcoin, silvercoin, chinacoin, ppcoin, lxcoin, bytecoin, Lindens, IMVU-credits, gamegold, etc...) and real dollars... (USD, JPY, CNY, etc...)

Oh, wait... that would make you a FOREX broker marketer then... Using your own internal coin as your "uni-coin"... which wouldn't actually have to be mined, just compared to the value of each market, based on your customers supply and demands. (Like paypal does. You just reinvented paypal. Except you have no control over it, and will just be manipulated by alien forces beyond any control, that will eventually crash the market you created, itself.)

I swear, I saw a uni-coin running through the woods!

I'll get this bounty... Simply because you can't do anything you actually propose. lol.

Your talents are better focused elsewhere, where they can actually reward you with something substantial. Programmers should stay away from money. They just don't understand it enough to make it work like a non-programmer wants... (The ones with the actual money, not the virtual money.)

How we want it to work...
I give you a twinkie to hold, I expect a twinkie back in a week, not half a twinkie the second I put it in your hands... not two twinkies, but that would be cool!

We don't want to hear that our twinkie is given away to someone who didn't have twinkies, just because he had a big mouth and takes a bite out of every twinkie that ends-up in his hands, and now there are no more whole twinkies left... but if I wait long enough, I'll get two-halves of a twinkie from the next two people who will give that same person one twinkie each. Give it to the neck-beard, he will eat it, give it to the twig-n-bones girl, she will eat it... Now I am going to starve, after feeding all those who didn't need my twinkie, but all wanted it. I'll be lucky if I get my twinkie back at all!