MasterCoin: New Protocol Layer Starting From “The Exodus Address”

[Seth Otterstad]

The attack in Thailand wouldn't have been possible without irresponsible lending by banks in risky real-estate speculations (where have I heard that story before)?

And how about when the Bank of England lost to a speculative attack by George Soros, in which he profited some 1.5b?  http://en.wikipedia.org/wiki/Black_Wednesday

What makes you think people are not going to irresponsibly lend GoldCoins?

I guess it doesn't really matter, since no one is going to buy the GoldCoins in the first place.  Faith in this escrow mechanism is not going to exist.

[Chang Hum]

Final question before I go to sleep, I see you've changed job this month.

It seems strange that in the same month, you're willing to invest $120000 of your own money in a business venture that has a substantial amount of work to be done and that you've been passionate about for a couple of years that you wouldn't work on this full time instead?

What are your reasons for working this around a 9 to 5 when money doesn't seem to be the issue?

[btcdrak]

One question about the spec I find difficult. The concept of reversible transaction. Say I make a payment to John (marked as reversible for 30 days). John spends some of that paying Mark (as non-reversible). Within the window, I reverse the payment to John. What now happens to the money John sent to Mark - is that reversed, and if not, how is the debt filled?

Yes, clearly a reversible transaction won't be spendable until the time limit passes. I should have mentioned that in the spec.

So this isn't something new, Bitcoin has this concept in as yet one unimplemented BIP if I recall.

[jimbobway]

Is the escrow optional for the supply and demand pic?  If so then the argument that it is faulty is irrelevant.

Are you asking if a user-created currency could track a value without an escrow fund? I wouldn't think so. If the escrow fund idea is flawed, then that feature of MasterCoin will fail to work. It will be an interesting experiment, to say the least!

I am asking if the value of a meta-coin could float freely and not use the escrow mechanism.

[dacoinminster]

The attack in Thailand wouldn't have been possible without irresponsible lending by banks in risky real-estate speculations (where have I heard that story before)?

And how about when the Bank of England lost to a speculative attack by George Soros, in which he profited some 1.5b?  http://en.wikipedia.org/wiki/Black_Wednesday

What makes you think people are not going to irresponsibly lend GoldCoins?

I guess it doesn't really matter, since no one is going to buy the GoldCoins in the first place.  Faith in this escrow mechanism is not going to exist.

It is absolutely true that a central bank cannot keep a fixed exchange rate while also manipulating interest rates in a free market economy. I would never argue against you on that. However, MasterCoin makes no attempt to control interest rates, therefore there is no competing goal to allow a speculative attack.

[dacoinminster]

Final question before I go to sleep, I see you've changed job this month.

It seems strange that in the same month, you're willing to invest $120000 of your own money in a business venture that has a substantial amount of work to be done and that you've been passionate about for a couple of years that you wouldn't work on this full time instead?

What are your reasons for working this around a 9 to 5 when money doesn't seem to be the issue?

I changed jobs this time last year, not this month

I really like working at Cozi, and I consider my bitcoins a very long term investment. It would be foolish to live off something which I believe still has a lot of potential for wild appreciation.

I am asking if the value of a meta-coin could float freely and not use the escrow mechanism.

That's an interesting question. I suppose you could do that by setting the aggression factor to zero, but that would be very strange because purchasing the new currency would destroy the MasterCoins since they would go into the escrow fund but never come out.

I think it would be better to use plain old colored coins for something like that.

Speaking of my job at Cozi, please forgive me if I don't post for awhile - I have some things I have to get done today! Thanks for your understanding . . .

[Seth Otterstad]

The attack in Thailand wouldn't have been possible without irresponsible lending by banks in risky real-estate speculations (where have I heard that story before)?

And how about when the Bank of England lost to a speculative attack by George Soros, in which he profited some 1.5b?  http://en.wikipedia.org/wiki/Black_Wednesday

What makes you think people are not going to irresponsibly lend GoldCoins?

I guess it doesn't really matter, since no one is going to buy the GoldCoins in the first place.  Faith in this escrow mechanism is not going to exist.

It is absolutely true that a central bank cannot keep a fixed exchange rate while also manipulating interest rates in a free market economy. I would never argue against you on that. However, MasterCoin makes no attempt to control interest rates, therefore there is no competing goal to allow a speculative attack.

I think I see the point you are trying to make.  When a central bank irresponsibly lends, it makes it easier to conduct the speculative attack by borrowing a huge amount of money and then dumping it on the open market.  Removing the irresponsible lending does not take away the incentive to conduct the attack though.  In GoldCoin's case, it will be much easier to pull off than on a national currency.  In fact, the herd mentality will probably cause a speculative attack by itself without any malicious actor.  National currencies still retain value when they abandon the peg, and the general population of national currency holders cannot easily go out and dump their GBP for Euros.  GoldCoin will drop to zero if the escrow fund's reserves run out, and holders of GoldCoin can easily convert them, so if even a small dump happens and there is any doubt that the escrow funds reserves cannot buy everyone's GoldCoins, then there will be a mad dash for the exit and the first person to sell will lose the least (or if he borrowed his GoldCoins, the most to gain).

I just thought of another problem with this method too.  The GoldCoin price mechanism will not be able to track the market in real time, since it uses the blockchain, and so it will be subject to arbitrage and the stabilizing mechanism will lose money.  The escrow fund is going to be manipulated down to zero.

I don't really know why I'm bothering to explain this since it is almost impossible for GoldCoin to get in this scenario in the first place.  I'm pretty sure I'm just wasting time, so I will send $20 worth of bitcoin to the first person to post after me if I post in this thread again.

[adamstgBit]

so whats stopping dacoinminster from sending his own coins over and over. after all he controls this address, he can take all the coins out and then put them back in giving himself monumental amounts of MasterCoins

plus he gets to keep the bitcoins

Feel free to watch funds sent to the Exodus address. They will stay there until September 1st. Probably a lot longer than that.

that works!

[dacoinminster]

OK - I lied. One more post before I leave this thread alone for awhile.

Check this, the first ever article about MasterCoin: http://onbitcoin.com/2013/08/01/mastercoin-proposal-to-make-bitcoin-more-stable-and-secure/

Sorry for leaving outstanding questions hanging. I'll probably have some more time to answer questions tomorrow.

[adamstgBit]

We already know how well this escrow fund system is going to work.  Central banks have been trying it for decades.  This makes me think you are not aware of the similarities between your idea and what already exists.  You might watch these Kahn Academy videos on how speculative attacks on currencies work to educate yourself:

Financial Crisis in Thailand Caused by Speculative Attack
http://www.youtube.com/watch?v=lA3sjWwu5-s

For more background, here is the whole Micro/Macroeconomics series.  The videos on currency reserves start at #123.
http://www.youtube.com/watch?v=_7VHfuWV-Qg&list=SPAEA5E9ACA1508F92

Even if you get a bunch of idiots to put money into GoldCoins and got it up to its target value, the idiots will be relieved of their money by speculative attackers.  The same thing that happened with the Thai Baht will happen to the GoldCoin.  Speculative attackers sold the Baht, knowing that the central bank would use its reserves to buy Baht to keep the value up, because they knew that if they kept doing it the central bank would run out of reserves and have to abandon the peg.  Speculators were borrowing Baht and selling it for dollars, knowing they were losing money in the short term, because they knew that if the central bank ran out of reserves they would show a huge profit.  In the same way, speculators will sell GoldCoins or borrow them to short them, even though they will lose money in the short term because the escrow fund will be able to buy cheaper, because they know that if they KEEP DOING IT until the escrow fund goes bankrupt, the peg will be abandoned and GoldCoins will undergo a huge devaluation.

You should stick to what you are good at and write code for things you know how to do, not dabble in areas in which you lack expertise.

I'm aware of these issues. I believe some of these currencies will be able to track their values for a very long time. Others will fail.

I'm very grateful that I don't need anybody's permission to dabble

Responses like this do not breed trust in your idea. Investors, you have been warned. I am thankful that only 35 BTC has been invested by the community.

He keeps dodging all the substantial questions such as "why are you the only one who can make mastercoins if you plan to release the source code eventually? Why does the money go directly into your account (other than "I deserve it !!").

Now someone's sent 1,222 Bitcoins into his stupid "exodus address". My guess is that these are his own funds that he's transferred to make it seem as there are actual investors into his scam.

he answered that question
hes using the funds to work on the project.

at 1million $ worth of bitcoin he quits his day job and makes this project his lifes work

[adamstgBit]

ok i give up, spiral_mind is just too annoying. for the record; i'm not investing in this thing, its just too risky, i might throw in a coin or half a coin, as a gamble, for now. But I have to say this idea is really really good. Maybe some of the things he wants to do just flat out won't work, but the core idea, piggybacking a new protocol on top of bitcoin's blockchain is quite exciting, imagine the possibilities.

[Voodah]

ok i give up, spiral_mind is just too annoying. for the record; i'm not investing in this thing, its just too risky, i might throw in a coin or half a coin, as a gamble, for now. But I have to say this idea is really really good. Maybe some of the things he wants to do just flat out won't work, but the core idea, piggybacking a new protocol on top of bitcoin's blockchain is quite exciting, imagine the possibilities.

I don't know why but up until this point in the thread I had assumed you were the crazy 16 btc investor.

I'm so tempted to chip some in, but I just plain don't like the fact that he's deleting posts instead of answering questions. Also timeframes.

[jimbobway]

dacoinminster, I am not sure if I like the escrow mechanism.  If you can convince me meta coins can be created safely without this mechanism and also intuitive to mastercoin then I may invest.

[dacoinminster]

dacoinminster, I am not sure if I like the escrow mechanism.  If you can convince me meta coins can be created safely without this mechanism and also intuitive to mastercoin then I may invest.

Yeah, I think you are looking for colored coins. Try here: http://www.bitcoinx.org

100BTC just came in a few minutes ago with the message "Good luck, may the force be with Mastercoin!" That is the biggest purchase by far other than my own. Thank you - I'll try to not let you guys down!

[TraderTimm]

Is the encoding for this protocol going to have an adverse resource impact on the blockchain, and by extension, the time it takes new users to acquire the entire thing before being able to use the official bitcoin client?

Reference:
http://bitcoin.stackexchange.com/questions/1438/is-there-a-limit-to-how-much-extra-data-can-be-put-into-blocks-via-scripts

I think I understand the direction, but I'm wary of the net effect.

Yes! A successful MasterCoin will give the regular bitcoin devs terrible migraines, as the block-chain explodes in size even faster. However, I've done my best to make sure that most transactions will be transfers of value, which is what bitcoin was designed to do.

So, if I understand this correctly - what is the ratio of actual bitcoin transactions to protocol overhead?

If this becomes onerous, how do you justify creating a system that isn't opt-in in the first place?

Why not just maintain your own ledger?

[jimbobway]

Thanks for answering my questions so far.

So, lets say I have 100 MetaGoldCoin in my MSC wallet.   This value could drop because the escrow takes them away from me to reduce supply, right?  I could wake up the next morning with 95 MetaGoldCoin in my MSC wallet, instead of 100 MetaGoldCoin?

[dacoinminster]

So, if I understand this correctly - what is the ratio of actual bitcoin transactions to protocol overhead?

If this becomes onerous, how do you justify creating a system that isn't opt-in in the first place?

Why not just maintain your own ledger?

The most common MasterCoin transactions take 2 or 3 bitcoin transactions (probably in a single "sendmany" broadcast).

I don't want to compete with bitcoin, I want to improve it, which is why I'm not doing my own alt-whatever.

Thanks for answering my questions so far.

So, lets say I have 100 MetaGoldCoin in my MSC wallet.   This value could drop because the escrow takes them away from me to reduce supply, right?  I could wake up the next morning with 95 MetaGoldCoin in my MSC wallet, instead of 100 MetaGoldCoin?

Goodness no! In order to affect the price, the protocol buys GoldCoins which are currently for sale or sells new ones to people currently looking to buy. That action changes the current price.

[vokain]

okay, so as I so far understand it, a person with a 1 gold oz can be assured of x MSC's value is worth what he wants for that gold coin because MSC is backed by an agreed amount of bitcoins? If not, initially, what will a MSC be worth?

and until the MSC's Eventually, all the currency mix?

[dacoinminster]

okay, so as I so far understand it, a person with a 1 gold oz can be assured of x MSC's value is worth what he wants for that gold coin because MSC is backed by an agreed amount of bitcoins? If not, initially, what will a MSC be worth?

and until the MSC's Eventually, all the currency mix?

I'm not sure if I understand this question, but it seems to be about what MasterCoins may be worth someday.

MasterCoin values will float freely, and can be held in escow as insurance against a target currency collapsing.

The initial price of MasterCoins is 0.01 BTC (actually a little cheaper, since you get a bonus for buying early). Where they go from there is up to the market, which will be driven by how well the protocol works and how quickly it is implemented.

[vokain]

what is the most likely (or two most likely) things that will cause your plan to fail?

besides wallet stealing, and government telling you to stop development