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

[BitPirate]

Me again :-)

I've been looking through the code and the white paper again. :-)

How do Mastercoins protect against double-spending without mining taking place on the current protocol layer?

What happens if I create multiple Mastercoin transactions simultaneously -- only one of which I have MSc for, and they all get into the same Bitcoin block? How do you decide which one is valid? And, once you've decided that, how do you prevent me from promulgating a different story?

[jadair10]

Have them all co-own them and the first address used to move them invalidated the others.

Wow - I hadn't even thought of doing it that way!

However, I want my software to be able to definitively answer questions like "How many MasterCoins are stored at address X", and co-owning them creates a lot of complexity for questions like that.

Personally, I'm leaning towards crediting the purchased MasterCoins to the address which sent the most BTC, as that will make using them easier on the purchaser.

Keep it simple. There are other fish to fry. Another consideration would be to allocate the appropriate number of MasterCoins to each input, as if they were separate transactions. Once the "simple transfer" is ready, then the user could consolidate them into one address? Of course, other considerations need to be taken into account (eg., transaction fees).

[killerstorm]

These special transactions Mastercoin uses get into blockchain too, and so all nodes can agree on their order.

If you try to spend more than you have, the second transaction will be considered invalid, as if it didn't exist.

So to do the Mastercoin thing you have to scan blockchain sequentially and update state whenever you see special transactions.

[jadair10]

Project Milestones, in rough order of implementation:

• Create simple greasemonkey script to run on blockchain.info and tell people how many MasterCoins they purchased (including the 10%/week earlybird bonus)
  
  • COMPLETED 8/6/2013: http://userscripts.org/scripts/show/175196
• Start the "MasterCoin Adviser" software project with code to implement "Simple Send" for test MasterCoins, then regular MasterCoins
  
  • COMPLETED 8/12/2013: https://bitcointalk.org/index.php?topic=265488.msg2919863#msg2919863
• Do a small MasterCoin giveaway thread using the above "simple-send" software
  
  • LAUNCHED 8/12/2013: https://bitcointalk.org/index.php?topic=272577.0
• Update MasterCoin Adviser to scan the block chain and track MasterCoin transfers (probably steal heavily from Armory)
• Update MasterCoin Adviser to create and track "Savings Wallet" logic (Test MasterCoins first, then MasterCoins)
• Update MasterCoin Adviser to create and track currency sales between MasterCoin and other currencies on the block chain(Test MasterCoins first, then MasterCoins)
• Update MasterCoin Adviser to create and track "Data Stream creation and display" logic (Test MasterCoins first, then MasterCoins)
• Update MasterCoin Adviser to create and track "Distributed Betting" logic (Test MasterCoins first, then MasterCoins)
• Update MasterCoin Adviser to create and track "Property creation, transfer, and sale" logic (Test MasterCoins first, then MasterCoins)
• Update MasterCoin Adviser to create and track "User-Defined Currency" logic (Test MasterCoins first, then MasterCoins)

Again, please remember that these features will probably come a lot slower than you want them!

Please explain the cost (i.e., in MasterCoin) to do all of the other things you have listed above, say to create and track a "user-defined currency". Can I create a user-defined currency with 1 MasterCoin?

[Zaih]

This is truly game changing.

great job.

[dacoinminster]

Me again :-)

I've been looking through the code and the white paper again. :-)

How do Mastercoins protect against double-spending without mining taking place on the current protocol layer?

What happens if I create multiple Mastercoin transactions simultaneously -- only one of which I have MSc for, and they all get into the same Bitcoin block? How do you decide which one is valid? And, once you've decided that, how do you prevent me from promulgating a different story?

Alex's post does a good job of answering this question:

These special transactions Mastercoin uses get into blockchain too, and so all nodes can agree on their order.

If you try to spend more than you have, the second transaction will be considered invalid, as if it didn't exist.

So to do the Mastercoin thing you have to scan blockchain sequentially and update state whenever you see special transactions.

Here's another interesting question:

Please explain the cost (i.e., in MasterCoin) to do all of the other things you have listed above, say to create and track a "user-defined currency". Can I create a user-defined currency with 1 MasterCoin?

The cost of these transactions is actually denominated in bitcoins, the protocol layer we are building on. A simple send operation costs about 0.0002 BTC, for instance (three above-dust outputs and a transaction fee; about $0.02). The other transactions are similar in cost.

[dacoinminster]

This is truly game changing.

great job.

Posts like this really make my day. Thanks!

Also, I love that your avatar is a sock puppet

I hope that is because you are going around posting positive comments on every project page thread, to keep everyone's spirits up.

[dacoinminster]

Interesting conversation with my wife this morning:

She's not willing to trade my vacation/weekend/evening time for ANY amount of money. The poor woman hasn't learned to be materialistic, and is satisfied with what we have. She just wants my time and attention for herself and the kids.

However, she IS willing to trade very small amounts of that time as an investment in my project and in our future. For instance, she might take the kids to her parents' house for a weekend at some point to give me time to work on this.

Consequently, our burn rate using up project funds is going to be very slow, which is good, and progress will be painfully slow, which is bad.

Once I have the basic code in place, I should be able to set up some bounties, which should speed things up a bit, but it looks like I won't be paying myself directly to work on this unless I start doing this full-time.

[dacoinminster]

I'd like to respond to some questions I got in an email here, so everybody can see them:

Hello again,
Apologies for taking so long to get back to you. I've been reading through your specifications paper and have come up with a few questions so I can understand the protocol better.

First of all, how is are your plans progressing? I noted that the Exodus Address has 1986 BTC. How does that compare to your funding target? How many payees have you had?

Progress is faster than expected, but much slower than I would like. Three of our project milestones have been achieved, and there are several more to go: https://bitcointalk.org/index.php?topic=265488.msg2841329#msg2841329

I have had a few minor expenses, but most of that money will probably be used for bounties once I have the basic code-base set up. Also, I'm not touching the money at that address until the fundraising is done September 1st.

There is no funding target really. I'm proceeding with this regardless of how much is raised. Extra funds just mean I can do it faster.

What user currencies do you expect to see (in addition to Gold and USD coins)? Can you explain how those commodity coins work too, please? Do I understand correctly that if we arbitrarily say GoldCoin is linked to the price of gold that its value against BTC will continuously track the ratio of Gold to USD?

I expect anything that has a price can be tracked in this way, including stocks, bonds, and every type of commodity. Your understanding is correct - these user-created coins track their target values as long as their escrow fund is sufficiently funded. You can read many pages of back-and-forth about that mechanism on this thread

Here are the notes I wrote as I went through your paper:

01) What do you mean by alt-chains - are these different to altcurrencies (e.g. Litecoin) ?
02) If so, can you name some?

Yes, I'm referring to LiteCoin and its brothers

03) Is there a concern of littering the Bitcoin blockchain with microtransactions that facilitate higher protocol layers.

Yes. This will cause some additional headaches for bitcoin scalability. If wildly successful, this sort of protocol layer will make the impact of Satoshi Dice seem pretty tame in comparison. However, this is a problem we need to face sooner or later anyway.

04) How consistently will the exchange rates between higher protocol be enforced?

For pegged currencies, price intervention happens once per day (when the price ticker updates). How much intervention is defined by the currency creator.

05) Mastercoin transactions: Is it the original payment sum that is split between the reference/data/marker payments?

The transaction is a message, as the whole protocol is message based. For a simple transfer, the amount of coins to transfer is embedded in the data payment. The payee is the reference payment. I have code that does simple transfers now (https://bitcointalk.org/index.php?topic=265488.msg2919863#msg2919863). You might want to take a look at that if the paper isn't clear.

06) You refer to a "fake bitcoin address" in transaction details explanation - how do you fake an address?

Like this: 1FakeAddressWithSomeDataInIt

You just have to generate a checksum to put at the end to make it a valid bitcoin address.

07) Do you expect to cloud wallets to implement support for consolidated addresses?

I think you are asking whether we will have web wallets which support these currencies someday? Yes, I hope so.

08) How are transactions from savings addresses made reversible?

By publishing a message which says they are reversible. Everyone can see that message, and will then treat any transactions from that address as reversible until the waiting period is past.

09) Is a Guardian address like escrow? Who owns them?

It's just another bitcoin wallet, kept safe somewhere in case your savings wallet gets compromised.

10) How will the reversibility period affect consumer trades? (e.g. I don't want wait a month to receive my goods, but if merchant dispatches before expiration I could recovery my money).

Nobody will accept payment from savings wallets for purchases. You will need to move them from the "savings" address to another address you control ("checking"?) and after the reversibility period is past you will be able to spend them.

11) Why has support for betting been added to MasterCoin?

Because I think it will be a popular feature, and I want MasterCoins to become obscenely valuable someday.

12) Who/where/how is the escrow fund (for higher level protocol coins) Managed?
13) Will the escrow fund be publically identified/readable?

Automatically managed by the protocol. Everyone running the protocol follows the same rules for price interventions, so human intervention is not needed. Consequently, everyone can see what is in the escrow fund, and everyone knows what it will do in a given set of circumstances.

14) Can other commodities be added as data streams? How is this done?

Anybody can create a data stream, and anybody can create a currency which tracks an existing data stream. This is done by sending a message defining the data stream, and then sending another message defining the currency. The formats of these messages are defined in the spec.

15) How is MasterCoin better for criminals than Bitcoin?

I think criminals (like the rest of us) will prefer to deal with stable currencies rather than unstable ones. Also, betting on data streams will likely be a breeding ground for insider trading. (Note: I'm writing this protocol, but I'll be very careful not to use it for anything like that myself - I would prefer to stay out of jail!)

Thanks for the great questions!

[dacoinminster]

I just got this question as a PM:

Hi,

I know you're probably busy with the MasterCoin project, but I'd like to ask when do you send out the MasterCoins? At the end of August?

I've send BTC to the Exodus Address yesterday but did not receive any transactions back.

Here is my reply:

You already have them! The protocol looks at the block chain to see who sent coins to the Exodus Address in order to determine who holds the initial set of MasterCoins.

This may be a common misunderstanding, so I'll mention this on the project thread.

Thanks!

P.S. If you want to know exactly how many you got, you can use the greasemonkey script I wrote for just that purpose: http://userscripts.org/scripts/show/175196

[vokain]

Interesting conversation with my wife this morning:

She's not willing to trade my vacation/weekend/evening time for ANY amount of money. The poor woman hasn't learned to be materialistic, and is satisfied with what we have. She just wants my time and attention for herself and the kids.

However, she IS willing to trade very small amounts of that time as an investment in my project and in our future. For instance, she might take the kids to her parents' house for a weekend at some point to give me time to work on this.

Consequently, our burn rate using up project funds is going to be very slow, which is good, and progress will be painfully slow, which is bad.

Once I have the basic code in place, I should be able to set up some bounties, which should speed things up a bit, but it looks like I won't be paying myself directly to work on this unless I start doing this full-time.

I'm pretty happy to hear this! Tell your other half that I very much appreciate even that much! This really could change her life forever and her children's lives for the better, and though she might not realize it yet, the point is she kind of gets it.

 And hey, the longer it takes the more time bitcoin has to gain in adoption! Win-win situation I think

[BitPirate]

Alex's post does a good job of answering this question:

These special transactions Mastercoin uses get into blockchain too, and so all nodes can agree on their order.

If you try to spend more than you have, the second transaction will be considered invalid, as if it didn't exist.

So to do the Mastercoin thing you have to scan blockchain sequentially and update state whenever you see special transactions.

Yes, I understand this -- but then this means that _all_ communications must take place through the blockchain, right? There can be no direct P2P communication between the Mastercoin clients.

What limitations do you think this imposes that you would not have if proof of work was done specifically for MSc? Potentially, I see communication would be much slower.

[killerstorm]

Yes, I understand this -- but then this means that _all_ communications must take place through the blockchain, right? There can be no direct P2P communication between the Mastercoin clients.

Yes, this is why it is said that it is a protocol layer above Bitcoin: Bitcoin is used as a transport layer.

What limitations do you think this imposes that you would not have if proof of work was done specifically for MSc? Potentially, I see communication would be much slower.

1. It is not possible to implement Simplified Payment Verification: you need to process whole blockchain to process transactions correctly. Thus thin clients have to trust server to report correct balance. Thin clients cannot check whether payments were, indeed, correct.

2. Double-spending is "easier", thus you need more confirmations. When it is reasonable to accept Bitcoin tx after 1-2 confirmations, you need 3-4 for same degree of certainty with Mastercoin.

[moltenmich]

Bounty suggestion: Create a website for mastercoin.org
Please discuss on the google group.

If it hasn't been mentioned a bounty for a professionally designed logo/graphic profile would prob be a good idea. Maybe a designer would let this thread vote on a few suggestions.

I mocked up a few ideas and fleshed one design out. Let me know what you guys think.

[vokain]

Bounty suggestion: Create a website for mastercoin.org
Please discuss on the google group.

If it hasn't been mentioned a bounty for a professionally designed logo/graphic profile would prob be a good idea. Maybe a designer would let this thread vote on a few suggestions.

I mocked up a few ideas and fleshed one design out. Let me know what you guys think.

^

is that mastercoin in binary?

although, I would like a logo, professional but alludes to the biblical book of exodus some how. IMO, those designs are a bit too sterile for my personal liking. Regardless, they look cool!

[herzmeister]

look just right out of a dystopian scifi movie

[moltenmich]

^

is that mastercoin in binary?

although, I would like a logo, professional but alludes to the biblical book of exodus some how. IMO, those designs are a bit too sterile for my personal liking. Regardless, they look cool!

Yep! It says Mastercoin. The black and white makes them look really harsh. But I'll think about exodus and see if I can come up with anything. That's an interesting angle.

[dacoinminster]

^

is that mastercoin in binary?

although, I would like a logo, professional but alludes to the biblical book of exodus some how. IMO, those designs are a bit too sterile for my personal liking. Regardless, they look cool!

Yep! It says Mastercoin. The black and white makes them look really harsh. But I'll think about exodus and see if I can come up with anything. That's an interesting angle.

Wow! That is awesome! For some reason the ones that look like radiation symbols appeal to me. I think maybe it is because I have always viewed this idea as potentially very destructive to existing money systems, like an atomic bomb.

We haven't actually set a bounty amount for this logo yet, so we probably should! Anybody know what what bitcoin projects are paying for logos these days?

[dacoinminster]

Another email with some thoughts about this project:

Hi J.R.,

    Congratulations on your launch. Sometimes you just have to make the leap and go for it. I know I would but my programming skills have gotten rusty throughout the years of doing other things. I am good at other things, probably some of which you may not be good at. My strengths are in project management, documentation, specification writing, failure mode and effects analysis, knowing the right questions to ask. And, I have had my fair share of time dealing with litigation, not to mention being an option trader. Anyways, let me know how I can help.

    I think the Exodus address should formally issue (eg. via. simple transfer) the early adopters their MasterCoins, rather than it being implied or calculated through a greasemonkey script.

    I am not particularly fond of having the client be the source for determining the validity of a mastercoin transaction. Bitcoin miners validate and discard and invalid transactions before the transaction is added to the blockchain. I think mastercoin needs to do the same. My thoughts on this are not complete.

    Also, testing, can we test mastercoin transactions on a test network?

    I am not sure email, or bitcointalk.org is the best place to collaborate? Any thoughts on this subject, I know a google group was created but I have seen very little action there.

My response:

The greasemonkey script is just a throwaway proof-of-concept so people can see what they bought, although the final code will use the same logic. I was worried that transferring the first MasterCoins purchased would decouple them from the investment, leading to accusations that I could just send more to other people if I wanted to. I wanted to have a very clear narrative about how they are created, with no wiggle-room for me to create new MasterCoins and send them wherever I want.

The work of the miners prevents double-spending on the bitcoin layer and on any layers built on top. Once the double-spending problem is solved, there is no need for further validation. Also, further validation would probably come at a price of less decentralization.

I'm definitely interested in building collaborative relationships, probably coupled with bounties. 

Rather than a test network, I have "Test MasterCoins" which are automatically owned by anybody who bought MasterCoins. New features will be implemented on them first.

Thanks so much for your thoughts! Keep an eye on the thread, as anything important should be mentioned there.


-J.R.

[dacoinminster]

I just noticed some people are discussing this project on LinkedIn: http://www.linkedin.com/groupItem?view=&gid=3721050&type=member&item=264074045&qid=a3aaa838-a67f-43ff-90a9-c59f1ff856f5&trk=group_most_popular-0-b-ttl&goback=%2Egde_3721050_member_264074045%2Egmp_3721050