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

[dacoinminster]

OK last question, then I am offline until tomorrow

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

That's a great question. I'd say the #1 risk is somebody else doing something similar, but doing it better and/or faster. That's what I worry about anyway.

#2 risk would probably be some unforeseen technical hurdle with my plan that can't be overcome.

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[spiral_mind]

thank you, keep up this earth-shattering work

how will the private key for 1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P be secured?

will it be the same private key for the BTC  address i use to buy MSC I use to control those MSC?

He controls this address. All funds go directly to him. That's seriously the only way to "make" mastercoin.

Don't take it from me, read his proposal. That's seriously what he says. His reasoning? Because he deserves it. And he's said he wants 1 million dollars in Bitcoins before he actually quits his job to make the program. Who could fall for this scam?

He's going to delete this post soon because he has deleted 30+ posts from this whole thread already.

[vokain]

thank you, keep up this earth-shattering work

how will the private key for 1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P be secured?

will it be the same private key for the BTC  address i use to buy MSC I use to control those MSC?

He controls this address. All funds go directly to him. That's seriously the only way to "make" mastercoin.

Don't take it from me, read his proposal. That's seriously what he says. His reasoning? Because he deserves it. And he's said he wants 1 million dollars in Bitcoins before he actually quits his job to make the program. Who could fall for this scam?

He's going to delete this post soon because he has deleted 30+ posts from this whole thread already.

perhaps. i'm asking more questions in the mean time.


==

so, the coins that go to the exodus address are in control of you to be used to develop/bootstrap this project. what if you used those coins to resend them to the exodus address basically copying your coins?

edit: nvm, we'll be able to watch you from creating more MSC.

These delayed MasterCoins will ensure that we have plenty of motivation to increase the value of MasterCoins by completing the features desired by users. The reward will be structured so that we receive 50% of the reward by one year after the initial sale, 75% by a year later, 87.5% by a year later, and so on.

how do you fairly decide who gets a piece of this pie

[Voodah]

+1k btc in the account already.

Amazing.

[Chang Hum]

+1k btc in the account already.

Amazing.

He added 1222 himself yesterday, not sure if he added the 100 on top very big investment if not

[bytemaster]

His #1 concern is centralization, but my plan is no more centralized than bitcoin, other than that I have a fundraiser at the start. I think this comes from a misunderstanding of a concept from my earlier paper.

As for the economic concerns:
1) Seems to be based on the earlier version of my paper
2) Seems to assume that one cannot control prices by controlling supply. I believe that is false. While the fed has indeed printed a lot of money, they could drive the value of the dollar to zero if they wanted to print billions of dollars and give them to every person on the planet.
3) Is about other methods of accomplishing this, such as his, which I have looked at enough to know that I didn't want to go that direction (However, I have the highest respect for bytemaster, and I know that he is working on some cool stuff)

Does that help?

Ok so it now seems that you have received $10K+ in funds for this project and are apparently providing a large amount of personal funds for this.   I hope you have a plan for refunding everyone's money because I would wager money that your system cannot and will not work as you think it will.   I was going to leave this thread be, but for the sake of those who are sending money in I wanted to make one more attempt to engage in real debate regarding the economics behind this.

1) I have read your more recent paper and most of my critiques still stand, but I will attempt to refocus them here.
2) My critique isn't that you couldn't manipulate prices using supply, but that manipulating supply is a very 'sloppy' control and has some lag. Markets can develop momentum and thus change faster than your supply manipulation can correct.  It would be like attempting to fly an airplane with a 30 second lag between when you issue the command and the flaps adjust.  It would be very easy to 'over correct' yourself into the ground.   

    That said, it would be possible to 'price fix' if the escrow fund had a bottomless ability to buy when the price started to fall and then sell when it got to high.   Unfortunately, this means the fund either has the ability to create money from nothing, hyper-inflate, or go bankrupt.  It is also clear from your paper that you have introduced the potential for multi-day lag before they can enter/exit the market. 

    In your paper you show the escrow fund as an 'entity' that is attempting to buy low and sell high.  You already assume that these escrow funds could 'make mistakes' by being too aggressive and that when they are weak they will take longer to get the price back to parity.    These escrow funds ability to influence the market is directly proportional to the real economic value backing the fund.   Every mistake these funds make directly undermines the value available to back these coins.

3) I was suggesting other means of accomplishing what you are doing that have SIGNIFICANT advantages and which your system will be competing with in the market because I have far more financial backing than you do at the moment.  This means you are taking peoples money to develop a system that will be competing against what I am doing and yet have failed to produce a comprehensive critique of what I am doing and how your system will out-compete mine in the market.   From what I gather you admit my approach will work and has no need for any trusted parties, public oracles (data feeds), or price fixing authorities.   Seems like your marketing is based entirely upon using Bitcoin's blockchain as some sort of credibility while destroying bitcoins as people convert to your system in a one-way trip. 

Suppose I were to issue bytemaster coins to anyone willing to destroy a Bitcoin to create one.... the act of destroying the bitcoin does NOTHING to give value to the BytemasterCoin.

There is one last thing I would like to point out that you must address:
Bitcoin has some little-known advanced features (such as scripting) which many people imagine will enable it to perform fancy new tricks someday. MasterCoin uses exactly NONE of those advanced
features, because support for them is not guaranteed in the future, and MasterCoin doesn't need them
anyway.

You then go on to state:

MasterCoin transactions are defined as a series of bitcoin payments from a bitcoin address where the payments match this pattern:    ...      One or more “data” payments (of any amount) to fake bitcoin addresses. (A fake bitcoin address can contain 20 bytes of arbitrary data, not including overhead such as the version number and
check-sum of the address.) This is data used by the protocol, such as the number of MasterCoins being paid.

Because these are 'fake addresses' and money is being sent to them (or Bitcoin would block them as dust) all of this money must be destroyed or lost as you do not have private keys for these data addresses.   This represents a VERY HIGH COST-PER-BYTE for your protocol.  Not to mention the fact that you incur the full overhead of a bitcoin transaction just to communicate a relatively small amount of information imbedded in the address.

I have spent SIGNIFICANT time thinking about scalability issues with BitShares which I am actively working on 80hrs /week  and I recognize that every byte of bandwidth counts.  Furthermore, if you want a reasonable buy-sell spread you need a large number of market participants or you will have a thin market.   This implies a need for a significant number of transactions and for your system this represents a large amount of overhead.

Lastly,  you have said that you didn't want to go in my direction, but have not stated why which would have enabled some useful discussion.  I have spent significant time explaining the problems faced with your approach and you owe it to those sending you money to do the same.   

Investor beware... don't send him money on faith alone until he has throughly vetted his idea and addressed heavy critique that should be a prereq. for any fund raising.   I vetted my idea and paid money for people to find problems with it.  I suggest he start a bounty and pay people to prove him wrong as this would be far cheaper than building it out and learning it the hard way.   


 

[Voodah]

[...] while destroying bitcoins as people convert to your system in a one-way trip. 

Food for thought.

[evoorhees]

Very interesting stuff. I love seeing the brilliance among this community. However, I sit in the camp that says the escrow agents aren't going to work.

Whenever someone says the word "peg" in relation to monies or commodities or assets of any kind, huge red flags should go up. We have seen often in discussion regarding Bitcoin, people have suggested, "well why not just peg it to gold, or to dollars, or some other other stable asset to eliminate the volatility?" (Max Keiser suggested such a thing a couple months ago...   )  The reason is that you cannot peg one asset to another in an open market. The peg will be broken.

The reason is what some of the others here have described - it will become the target of a speculative attack. And the attacker has a nearly guaranteed chance of winning if he has enough money to throw at it. In the real world, we have seen such speculative attacks on government currencies including the Thai Baht and UK pound (that's how Soros got famous). If private actors can break the pegs of government currencies, it can be reasonably inferred that breaking a crypto-asset peg with a market cap of only several million dollars would be trivial.

An escrow fund cannot be expected to keep an exchange rate stable when set against the forces of hostile speculators.

Dacoinminster says

You are quite right that some currencies will fail. For instance, if I define a currency that appreciates at 10% a day, it will definitely not be able to track that.

He's suggesting that currencies/assets which don't move in a volatile manner, like 10% a day, would be able to be successfully tracked long term by the escrow fund. What he's missing is that when you add speculative attacks, the attacker can turn any otherwise stable asset into an asset that is trying to appreciate/depreciate 10% per day! That's the problem. Anyone with a bunch of money can come in and start acquiring or dumping the asset in question. The escrow fund will bankrupt itself trying to re-balance in perpetuity.

I do not believe there is a way around this problem. If there was, why don't we just create an escrow agent for Bitcoin, right now, that keeps the price forever between $95 and $105?  Why doesn't MtGox create a capital pool of $100m in escrow to enforce this peg? Because someone with $200m will break the peg, and make a killing (and the attacker probably doesn't even need that much when you throw in various leveraged instruments).

I don't want to throw the baby out with the bathwater here, however. Dacoinminster - do you believe your system is worthy of development if we assumed the escrow/stability idea was proven to be unworkable? Is that escrow/stability system for user-defined currencies the core value proposition of your idea?

For the record, I don't think "stability" of an asset price can be achieve through the machinations of market actors. Stability is something which must be arrived at, over time, as a market finds equilibrium. It's an organic process, which cannot be counterfeited, though so many central planners have tried.

In any case, this is really fascinating technology being discussed and kudos to you OP for the creativity and work that's gone into this.

[bytemaster]

Very interesting stuff. I love seeing the brilliance among this community. However, I sit in the camp that says the escrow agents aren't going to work.

Whenever someone says the word "peg" in relation to monies or commodities or assets of any kind, huge red flags should go up. We have seen often in discussion regarding Bitcoin, people have suggested, "well why not just peg it to gold, or to dollars, or some other other stable asset to eliminate the volatility?" (Max Keiser suggested such a thing a couple months ago...   )  The reason is that you cannot peg one asset to another in an open market. The peg will be broken.

The reason is what some of the others here have described - it will become the target of a speculative attack. And the attacker has a nearly guaranteed chance of winning if he has enough money to throw at it. In the real world, we have seen such speculative attacks on government currencies including the Thai Baht and UK pound (that's how Soros got famous). If private actors can break the pegs of government currencies, it can be reasonably inferred that breaking a crypto-asset peg with a market cap of only several million dollars would be trivial.

An escrow fund cannot be expected to keep an exchange rate stable when set against the forces of hostile speculators.

Dacoinminster says

You are quite right that some currencies will fail. For instance, if I define a currency that appreciates at 10% a day, it will definitely not be able to track that.

He's suggesting that currencies/assets which don't move in a volatile manner, like 10% a day, would be able to be successfully tracked long term by the escrow fund. What he's missing is that when you add speculative attacks, the attacker can turn any otherwise stable asset into an asset that is trying to appreciate/depreciate 10% per day! That's the problem. Anyone with a bunch of money can come in and start acquiring or dumping the asset in question. The escrow fund will bankrupt itself trying to re-balance in perpetuity.

I do not believe there is a way around this problem. If there was, why don't we just create an escrow agent for Bitcoin, right now, that keeps the price forever between $95 and $105?  Why doesn't MtGox create a capital pool of $100m in escrow to enforce this peg? Because someone with $200m will break the peg, and make a killing (and the attacker probably doesn't even need that much when you throw in various leveraged instruments).

I don't want to throw the baby out with the bathwater here, however. Dacoinminster - do you believe your system is worthy of development if we assumed the escrow/stability idea was proven to be unworkable? Is that escrow/stability system for user-defined currencies the core value proposition of your idea?

For the record, I don't think "stability" of an asset price can be achieve through the machinations of market actors. Stability is something which must be arrived at, over time, as a market finds equilibrium. It's an organic process, which cannot be counterfeited, though so many central planners have tried.

In any case, this is really fascinating technology being discussed and kudos to you OP for the creativity and work that's gone into this.

I would be interested in your take on the means by which BitShares creates BitUSD / BitGold that tracks the value of USD/Gold without a 'peg' based entirely on market actors.   I agree 100% with your assessment above.

[killerstorm]

2) Seems to assume that one cannot control prices by controlling supply. I believe that is false. While the fed has indeed printed a lot of money, they could drive the value of the dollar to zero if they wanted to print billions of dollars and give them to every person on the planet.

Increasing supply to decrease price is the easy part. Decreasing supply to increase price is the impossible part.

Actually it is possible...

Suppose there is a trading system which facilitates trading of three distinct kinds of asset: money, e-gold and e-gold-gen. (E-gold-gen is a weird e-gold derivative.)

There are separate order books for e-gold and for e-gold-gen, however, there is one peculiarity in this system: it can match e-gold  bids with e-gold-gen asks, and e-gold asks with e-gold-gen bids under some conditions.

As long as e-gold price is around target price, no cross-matching is done, i.e. e-gold bids are only matches with e-gold asks.

Now suppose e-gold price is below the target price. When person tries to sell e-gold below target price, his ask is matched with e-gold-gen bid.

If X is e-gold ask price and Y is e-gold-gen bid price, then one unit of e-gold creates X/Y units of e-gold-gen.

I.e. we reduce supply of e-gold and increase supply of e-gold-gen. As people sell more and more e-gold it eats through e-gold-gen orderbook, and more and more e-gold-gen is created. (Lower the price of e-gold-gen, more of it is created per unit of e-gold.)

Obviously, this works as long as there is a demand for e-gold-gen. If this is an economic abstraction, there are always people who want to buy at very low price, so it always works.

In reality, at some point people will stop buying e-gold-gen no matter what's the price, so whole system will collapse at that point.

(I.e. if you approach it with supply/demand curves it works, but if you assume that demand is finite it doesn't.)

Now if price of e-gold is above the target, it works in different direction: e-gold bids are matched with e-gold-gen asks, and again you need X/Y units of e-gold-gen to create one unit of gold. If there is a lot of extra demand, it will eat through e-gold-gen asks, price of e-gold-gen will get higher and higher, and one unit of e-gold-gen will create more units of e-gold.

[BitPirate]

Very interesting stuff. I love seeing the brilliance among this community. However, I sit in the camp that says the escrow agents aren't going to work.

Whenever someone says the word "peg" in relation to monies or commodities or assets of any kind, huge red flags should go up. We have seen often in discussion regarding Bitcoin, people have suggested, "well why not just peg it to gold, or to dollars, or some other other stable asset to eliminate the volatility?" (Max Keiser suggested such a thing a couple months ago...   )  The reason is that you cannot peg one asset to another in an open market. The peg will be broken.

The reason is what some of the others here have described - it will become the target of a speculative attack. And the attacker has a nearly guaranteed chance of winning if he has enough money to throw at it. In the real world, we have seen such speculative attacks on government currencies including the Thai Baht and UK pound (that's how Soros got famous). If private actors can break the pegs of government currencies, it can be reasonably inferred that breaking a crypto-asset peg with a market cap of only several million dollars would be trivial.

An escrow fund cannot be expected to keep an exchange rate stable when set against the forces of hostile speculators.

Dacoinminster says

You are quite right that some currencies will fail. For instance, if I define a currency that appreciates at 10% a day, it will definitely not be able to track that.

He's suggesting that currencies/assets which don't move in a volatile manner, like 10% a day, would be able to be successfully tracked long term by the escrow fund. What he's missing is that when you add speculative attacks, the attacker can turn any otherwise stable asset into an asset that is trying to appreciate/depreciate 10% per day! That's the problem. Anyone with a bunch of money can come in and start acquiring or dumping the asset in question. The escrow fund will bankrupt itself trying to re-balance in perpetuity.

I do not believe there is a way around this problem. If there was, why don't we just create an escrow agent for Bitcoin, right now, that keeps the price forever between $95 and $105?  Why doesn't MtGox create a capital pool of $100m in escrow to enforce this peg? Because someone with $200m will break the peg, and make a killing (and the attacker probably doesn't even need that much when you throw in various leveraged instruments).

I don't want to throw the baby out with the bathwater here, however. Dacoinminster - do you believe your system is worthy of development if we assumed the escrow/stability idea was proven to be unworkable? Is that escrow/stability system for user-defined currencies the core value proposition of your idea?

For the record, I don't think "stability" of an asset price can be achieve through the machinations of market actors. Stability is something which must be arrived at, over time, as a market finds equilibrium. It's an organic process, which cannot be counterfeited, though so many central planners have tried.

In any case, this is really fascinating technology being discussed and kudos to you OP for the creativity and work that's gone into this.

+1. This is exactly what I meant by "Norman-Lamont-y". Except this would be easier than breaking a national peg, not only because of the reduced volume required, but the fact that the escrow will behave entirely predictably. You know when it will buy and sell, and how much.

More to the point however, I just don't understand stability as a goal in and of itself. In my mind, a stable valuation represents that other, more important goals underpinning the valuation have been met. If stability is not there, there is a reason for it. If that reason is "we are so small it is easy to get kicked around", then pissing away money every time someone kicks you around seems a bit daft. It hasn't made you bigger or stronger -- just "more stable" (and even that last part is debatable -- in reality it has likely just ensured that your future kickings increase in brutality and frequency).

[btcdrak]

Numerous people present detailed technical concerns, and the only response is "I am aware of the issues, I believe it will work". That and he deletes posts he doesn't like. Sigh

And given he's put in 1,222BTC himself, you have to wonder if some of the other payments aren't his also. I don't believe he's scamming, but I think he's now committed himself so deeply that even if it's clear he is wrong, he won't back out. Such is the power of the ego sadly. It does seem he's not got a deep understanding of market/finance fundamentals. The censorship is also worrying. If people are being offensive and swearing etc, that is different, but to censor people's posts because they don't agree is bordering evil.

[vokain]

All very valid concerns. I think this idea is worth a (well executed) shot. Let's address *every* possible technical issue to a logical end in your theory this month before you undertake writing the source

I would prefer if these coins are destroyed via making 1exodus a blackhole by destroying every copy of the key, and for a separate fund to be created to support development, or vice versa. You can even send the coins back to the sending address if it turns out there's a flaw, and start over. Anyways, would this be more fair? why or why not. because if you spend bitcoins from 1exodus, the coins will get recirculated into the bitcoin ecosystem. i don't think this is good for establishing the value of MSC. Consider the fact that we have not had the luxury of two years' obsession poring over these ideas when answering our questions and concerns. The important thing is that we discuss these things through to a logical end.

But, all in all, this idea is too good to just let it not happen. We must make it happen.

Once you understand the risks, and have properly consolidated your coins in a single address in a PC wallet, you can purchase MasterCoins by sending your bitcoins to the Exodus Address, which is: 1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P

Also, I'd be grateful if a few people could quote the Exodus Address on this thread, as that will make it less likely that someone will try to hack my account and change the address.

[killerstorm]

I see a problem: protocol only works for a client which scans whole blockchain.

Secure thin clients (similar to SPV clients like Electrum, MultiBit) are fundamentally impossible.

And running full node client like Bitcoin-Qt will soon be very challenging,

Hey Alex. I think think if this is successful then it will be possible to make thin clients. For instance, the code scanning the block chain doesn't need to run in the same place as the code signing the transactions.

Well, yes... You'll need it to run on servers you can trust. Otherwise server can make it look like you received a payment when you didn't.

Going further, I really don't see why you would want to bloat Bitcoin blockchain with data... Basically, you just need to timestamp messages, and there is much less wasteful way to do it.

E.g. you can put all these data-transactions into a Merkle tree and timestamp only root of that Merkle tree. Or you can use a merged-mined alt-chain.

Let's summarize You use Bitcoin for two things: secure timestamp via proof-of-work, and storage of data. Storage of data is expensive.

Thus you can drastically reduce costs if you store data elsewhere.

[bvt]

Numerous people present detailed technical concerns, and the only response is "I am aware of the issues, I believe it will work". That and he deletes posts he doesn't like. Sigh

And given he's put in 1,222BTC himself, you have to wonder if some of the other payments aren't his also. I don't believe he's scamming, but I think he's now committed himself so deeply that even if it's clear he is wrong, he won't back out. Such is the power of the ego sadly. It does seem he's not got a deep understanding of market/finance fundamentals. The censorship is also worrying. If people are being offensive and swearing etc, that is different, but to censor people's posts because they don't agree is bordering evil.

I agree that I doubt he's outright scamming. I think he genuinely wants to make this work.  He's gonna have to realize that when he go on a mass delete spree he will agitate people. His own money he's putting up is safe. There's virtually no risk for him to outright lose money and he expects the same return for his money.

I wish he had presented his ideas and gone back to the drawing board as opposed to launching it. He's even saying that he thinks he #1 reason this might not work is if someone puts something out before him. Someone pointed out that he went from v.0.7 to v.1.0 without much change in the paper.

It's very rushed because he's afraid he wont be first, and all other concerns are ignored or downplayed. 

[CIYAM]

It's very rushed because he's afraid he wont be first, and all other concerns are ignored or downplayed. 

I agree and can understand the thinking also (I rushed to get CIYAM Open online well before I was really ready although I didn't ask for any investment).

Hopefully he will take his time and work out a more considered path forward (am still interested somewhat in the concept although I don't really like the idea of creating "dust" tx's that can never be spent).

[dacoinminster]

I realize I have some questions on this thread I need to answer, and I'll try to get to those soon, but I'm just so excited I need to post this first:

SOMEBODY BOUGHT 420BTC WORTH OF MASTERCOINS!!

They left a message: "Let me issue and control a nation's money and I care not who writes the laws"

This is getting serious.

Also, I got a PM asking me how much of my own BTC I have invested. The 1222BTC purchase was 99% of my BTC. I have a couple coins at Coinbase (plus some 4 I bought on behalf of a friend, but they aren't really mine), and less than 1 BTC on my phone. The other coins coming in are from people who think this crazy idea might actually work.

[ripper234]

I realize I have some questions on this thread I need to answer, and I'll try to get to those soon, but I'm just so excited I need to post this first:

SOMEBODY BOUGHT 420BTC WORTH OF MASTERCOINS!!

They left a message: "Let me issue and control a nation's money and I care not who writes the laws"

This is getting serious.

Also, I got a PM asking me how much of my own BTC I have invested. The 1222BTC purchase was 99% of my BTC. I have a couple coins at Coinbase (plus some 4 I bought on behalf of a friend, but they aren't really mine), and less than 1 BTC on my phone. The other coins coming in are from people who think this crazy idea might actually work.

You are being way too public with how much BTC you own, in my humble opinion.
Even before the above statement you gave out plenty of information.
Are you ok with the entire world knowing exactly how much money (or crypto-money) you have?

[dacoinminster]

thank you, keep up this earth-shattering work

how will the private key for 1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P be secured?

will it be the same private key for the BTC  address i use to buy MSC I use to control those MSC?

Yup!

[dacoinminster]

He controls this address. All funds go directly to him. That's seriously the only way to "make" mastercoin.

Don't take it from me, read his proposal. That's seriously what he says. His reasoning? Because he deserves it. And he's said he wants 1 million dollars in Bitcoins before he actually quits his job to make the program. Who could fall for this scam?

He's going to delete this post soon because he has deleted 30+ posts from this whole thread already.

OK. I'll leave this one.

I've done my best to answer legitimate questions, and only delete "THIS IS A SCAM" posts, which were cluttering up my thread. You should definitely be able to express that opinion, but please keep it to the "MasterCoin is a scam" threads.

Anybody who wants to talk about how this is all just a scam, you can do so on Spiral_Mind's thread here: https://bitcointalk.org/index.php?topic=265666.0 and dev/null's thread here: https://bitcointalk.org/index.php?topic=266386.0

As for answering scam accusations, the only way I can prove them wrong is by executing on this project.