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

[dacoinminster]

I have these same questions. From the BitAngels interview, it sounds like there is no protocol to prevent infinite quantitative easing. If it is successful we will see competing DinersClubCoin, AliCoin, VisaCoin, etc.

TBH, the name MasterCoin may provoke a trademark dispute. I don't see anything wrong with just calling it Exodus.

I expect that MasterCoin clones will rise. If they have good ideas, we may incorporate something similar in our implementation. I expect that their success will always be niche, much like the alt-chains that surround bitcoin.

Somebody approached me via email about the Trademark issue, claiming that it would cost about $500 to register the trademark, and defending the TM would not be difficult since we were first. I expect the non-profit foundation may do this fairly early.

As you say, we can always change it to something else, but I haven't seen anything indicating that a name change will be necessary.

[dacoinminster]

I'm a little worried that some of our last-minute investors may get bit by time zones. Please be aware that the fundraiser ends at midnight tomorrow as determined by the block chain timestamp (UTC). If you send an investment when it is still August in your local time, it may not be August anymore on the block chain.

Bitcoins sent to the Exodus Address after that date will not purchase MasterCoins! Inevitably somebody will make this mistake, and I'll have to issue a refund. Please don't be that person.

[dacoinminster]

A question I answered via email:

On Fri, Aug 30, 2013 at 6:14 AM, Adam ------- wrote:

    Hello,

    I have a question about the Mastercoin protocol which you have published
    and recently publicised (and I don’t have an account on the Bitcoin
    forum).

    Why is it appropriate for the ‘marker payments’ (the payments which mark
    a given set of transactions as being a Mastercoin transaction) to be
    sent to an address for which someone (i.e. you) has the private key, and
    not a particular address for which no private key exists? I understand
    using such an address for bootstrapping and fundraising, but not for
    anything beyond that. What will happen to all of the funds sent to the
    Exodus address in the use of Mastercoin?

    In any case, I, who own some Mastercoins, am in favour of changing the
    protocol so that the data are not hidden in the output addresses (see,
    for example, <https://bitcointalk.org/index.php?topic=284178.msg3040840#msg3040840>).

My reply:

Hey Adam,

You are absolutely right that marker payments could be sent to any address. I'm trying to be sensitive about not creating  too many unspendable TX's, so I wanted the address to be a real one, and the Exodus Address seemed like a logical choice. I doubt much money will come in that way, but to the extent money does come in, it is devoted to the non-profit MasterCoin foundation.

I think everyone is in favor of finding more efficient ways to record MasterCoin data. I expect that the details will largely be driven by other smart people interested in the project, and we'll switch over once it becomes clear that the new method doesn't have any critical drawbacks (such as making MasterCoin less secure or easier to "shut off" by an unfriendly bitcoin dev).

Thanks!

[dacoinminster]

Another email question I answered:

    On Fri, Aug 30, 2013 at 2:04 AM, Eddie ------ wrote:

        Hi J.R.,

        I would like to participate in the Master Coin giveaway and have a few
        questions. First of all, can you confirm that you are the same real
        person who goes by the alias "dacoinminster" on the Bitcoin Forum <
        https://bitcointalk.org >? If the answer to that question is yes, then I
        was wondering if you could please clarify the following instructions for
        sending bitcoin to the Exodus Address which you wrote about in this post
        at published at the end of July 2013:

        ----------------------------------------------------------------------------------------
        https://bitcointalk.org/index.php?topic=265488.0

        Do not attempt to purchase MasterCoins with a web wallet (YOU COULD LOSE
        YOUR MONEY). You must use a wallet where you can control the sending
        address by sending all your funds to that address first, then purchasing
        MasterCoins with that address. (edit: Ripper pointed out that
        BlockChain.info wallet should work)

        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
        ...
        ----------------------------------------------------------------------------------------

        Here you posted few weeks ago (August 2013), as excerpted about the
        giveaway:

        ----------------------------------------------------------------------------------------
        https://bitcointalk.org/index.php?topic=272577.0

        I have over 520 MasterCoins and 520 Test MasterCoins designated for this
        giveaway. To receive your MasterCoins and Test MasterCoins, reply on
        this thread with the following:

            Your bitcoin address (you must be able to SEND bitcoins from this
            address as well as receive them, so web wallets which manage private
            keys for you won't work for this)
        ...
        ----------------------------------------------------------------------------------------

        I am a bitcoin newbie! I have control of my own wallet which is
        encrypted and on my laptop, thus I have the private key to it and am not
        using a web based wallet. I specifically use Bitcoin-Qt app to access my
        wallet. I have only so far only received Bitcoin from other parties such
        as Mt. Gox. Whenever preparing to receive, I use Bitcoin-Qt's "Receive"
        section to generate an address which I then give to the payer / sender
        (e.g., Mt. Gox) strictly for receiving bitcoin. If I send Bitcoins to
        your Exodus Address, how on Earth will you be able to send me Master
        Coins in return to my bitcoin wallet, unless I provide you with a
        completely separate "receive" address associated with my wallet? And
        even if I do send you a separate receive address to which you'll send me
        the Master Coins, how do you know how many bitcoins I have sent you so
        you can send me in return the commensurate amount of Master Coins per
        your promotion?

        The deadline is soon approaching and I'd like to participate but I need
        to understand this process better (especially for those new to Bitcoin
        let alone new to Master Coin) and the language needs to be clarified
        too. For example in the excerpt above, you refer to a bitcoin address
        (singular no plural) which can be used to "SEND" and receive:

        > Your bitcoin address (you must be able to SEND bitcoins from this address as well as receive them ...

        Its my understanding there is no such thing as a single bitcoin address
        that can be used for sending and receiving.

        Thanks for the clarification,

        -Eddie

        --
        http://www.fastmail.fm - A no graphics, no pop-ups email service

My reply:

On Fri, Aug 30, 2013 at 10:27 AM, J.R. Willett wrote:

    Hey Eddie,

    Yes, I am dacoinminster.

    If you send bitcoins from bitcoin-qt to the Exodus Address, it's pretty hard to mess that up. I don't actually know of a way to mess that up.

    I recommend choosing an address on bitcoin QT to control your MasterCoins, but that is more for your own convenience than out of necessity. Best practice is to send ALL of your bitcoins to one of your bitcoin-qt addresses, then send however much you want to invest to the Exodus Address.

    If you look at the transactions sent to the Exodus Address (http://blockchain.info/address/1EXoDusjGwvnjZUyKkxZ4UHEf77z6A5S4P?offset=0&filter=0) you'll see lots of people who didn't take that advice. For those people, lots of different addresses contribute to the payment they made to the Exodus Address. In their case, the protocol will recognize the address which is the biggest contributor as the owner of the MasterCoins.

    Bitcoin has the ability to trace which address coins came from, so that is what is meant by a "sending address". To send your MasterCoins to someone else, you have to send from that address (the one which owns your MasterCoins) again using a very specific transaction which creates a "message" that everyone can see that your address has sent those coins to someone else. I won't get into the details, but you can read all about it on the project thread.

    Thanks, and please let me know if I can answer any other questions for you.

    -J.R.

    P.S. The 520 or so MasterCoins being given away were purchased by me from the Exodus Address. The giveaway is a different thing from purchasing MasterCoins.

[dacoinminster]

David Johnston (executive director of bitangels) posted a very detailed defense of my project against some criticisms it was receiving for not being different enough from bitcoin, which I think is worth posting here:

Dean,

Thanks for digging in deeper and stating the question in a different way. I think I understand the context of your questions now.

We are all in this due diligence process together and I'm building my own understanding of all the aspects of this project. I don't have any reason to "step around" your question, I'll attempt to address it based on the best of my understanding and I'll let additional folks with deeper technical understanding like Ron and J.R. answer it from their perspective.
So to your question "What functionality is Mastercoin providing that isn’t already being met by Bitcoin?"

To my understanding Mastercoin is leveraging the existing functionality of the Bitcoin protocol. That is to say it is NOT adding any baseline functions that aren't already present in the Bitcoin protocol. What it IS going to do is create a new layer on top of the Bitcoin protocol focused on the use cases listed, including peer to peer exchange, futures contracts, and issuing additional currencies.

From your comments it seems you aren't drawing a distinction between what the Bitcoin Protocol "can" do and what the existing clients that implement the Bitcoin protocol "actually" do. That is why I asked my question about, if you knew of any actual client implementations that offered the use cases that Mastercoin is developing. If the answer to my question is "No" there aren't any current implementations, than I would respond that the reason to "bother with mastercoin in the first place" is to create actual implementations of those use cases.

For example my understanding is that the Exodus address serves the function of marking Bitcoins (in the history of the Bitcoin ledger) involved in the Mastercoin protocol therefore giving the clients a point of reference for tracking their usage and for identifying the functions they are executing if I'm misunderstanding the protocol here Ron or J.R. feel free to correct me, I've only read the white paper three times. If Dean you are proposing that there isn't a need for an "Exodus" address of sorts in order to make these use cases possible then I'd like to understand that better.

Assuming for the sake of this discussion that there IS a need for a Exodus address type of set up, then allow me to continue in logical progression to your note about Mastercoin being its "own little silo". I believe this sentiment is related to the response I hear from some programmers who dislike "pre-mined" currencies which are often owned primarily by their creators. I'd like to make a few points here. Mastercoin being on the same block chain as Bitcoin of course doesn't need to be mined with additional hashing power.

So the question becomes "What is a fair and logical way to distribute Mastercoins through the exodus address to people that wish to use their functionality"? There are lots of possible answers here, random give away, sell them, give them to developers, on and on. I stated earlier that I believe J.R. has decided on a fairly compelling way of handling this problem. That is to publicly announce on the forums that those interested in developing these use cases can support their development by purchasing Mastercoins until a certain date. Having published the technical spec and spoken publicly (at the Bitcoin Conference) about these developments he is interested to invest in and support the development of. There are also Mastercoins set aside for those developers that contribute to the development of Mastercoin in the coming years, which I believe is important as well.

So Mastercoin is not only the vehicle for the Exodus address, it becomes a vehicle for those that want to invest in and support the development of these use cases. So far that vehicle in my view has proved successful with hundreds of users deciding to support it and having collected 2,618 BTC (more than twice J.R.'s initial investment) which can now be deployed to turn the functionality of what Bitcoin "can" do into the functionality actually offered in user accessible clients.

I fully acknowledge your question is a very important one. It is one of the main questions I asked J.R. during the due diligence, for me I stated it as "is the value of this protocol in the Mastercoins themselves or in the applications it will support. Stated another way, "are these Mastercoins going to be worth anything, or is all the value created by those that offer the services on top of Mastercoin?" In our discussions J.R. convinced me that their is a value in the Mastercoins themselves because users will have to acquire them to preform the functions they desire, for futures, peer to peer exchange of other currencies or issuing of new currencies. So the value equation is similar to Bitcoin in that it is a function of scarcity and utility. I believe that Mastercoins will be scarce and I believe its functions will have great utility. Therefore I'm of the opinion they will have value.

On a related question that I also asked of "if this is open source, what prevents someone else from creating their own forked version of Mastercoin on the Bitcoin blockchain"? The answer, (as it is for Bitcoin also) is: there is nothing preventing someone from creating another version, but the first mover advantage is a big one. Bitcoin has dominated the marketplace in comparison to Litecoin and others due to this first mover advantage, name recognition, momentum, user adoption and so forth. Mastercoin seems to be poised to be the first to implement these functions on the block chain and therefore it will have this first mover advantage in the context of these use cases.

I hope I've explained my current understanding in a clear way. I look forward to your thoughts and any corrections or clarifications from the other technical folks here.
I see this open discussion as a very healthy process and extremely valuable to the due diligence process.

Best Regards,
David A. Johnston
BitAngels.co

David, your understanding is 100% correct. It's just too bad that you have only read the whitepaper three times though - how disappointing

You've given very detailed answers to multiple objections, including some not even explicitly raised on the bitangels thread. If people don't get it, or don't agree, they are free to not invest. It's an opt-in functionality, and clearly some people will not opt-in.

Thanks for taking so much time to try to answer questions and objections. Its nice to not be the only one tackling that undertaking.

[TraderTimm]

Sent to David just a bit ago:

Mastercoin - Protocol Or Blockchain Trojan?

I've read recently that you're defending the Mastercoin project. While this is to be expected considering the
ambitious goals that have been put forward by its creator, I'd like you to please consider the longer-term
implications of what this project means for Bitcoin.

This project is taking an existing resource, the collective hashing power of the entire Bitcoin network, and
exploiting it for its own ends. There is no way to opt-out, unless we hard-fork with another client upgrade.

By treating the blockchain and the transactions within it as a "resource", to collectively read/write data into
the blockchain itself, we have a dangerous precedent -- resource usage that will burden the entire network and
everyone who uses it -- without bearing any gains, except for those using the Mastercoin protocol.

This is alarmingly similar to the behavior of bot-nets, collectively compromised machines (no opt-in, of course)
being exploited to perform other tasks that their users don't condone.

Please reconsider your defense of this project, as added weight behind it may cause a knock-on effect that will
be very difficult to correct in the future without a deliberate hard-fork, and will cause other problems.

Confer with gmaxwell, he's on freenode IRC #bitcoin channel - or via the forums - to confirm what I'm saying.
He's a in-depth subject expert in blockchain mechanics, and I believe he has the same view - that writing data
to the blockchain as Mastercoin proposes is a dangerous and potentially disruptive force.

Thanks for reading,

TT

[dacoinminster]

Sent to David just a bit ago:

Mastercoin - Protocol Or Blockchain Trojan?

I've read recently that you're defending the Mastercoin project. While this is to be expected considering the
ambitious goals that have been put forward by its creator, I'd like you to please consider the longer-term
implications of what this project means for Bitcoin.

This project is taking an existing resource, the collective hashing power of the entire Bitcoin network, and
exploiting it for its own ends. There is no way to opt-out, unless we hard-fork with another client upgrade.

By treating the blockchain and the transactions within it as a "resource", to collectively read/write data into
the blockchain itself, we have a dangerous precedent -- resource usage that will burden the entire network and
everyone who uses it -- without bearing any gains, except for those using the Mastercoin protocol.

This is alarmingly similar to the behavior of bot-nets, collectively compromised machines (no opt-in, of course)
being exploited to perform other tasks that their users don't condone.

Please reconsider your defense of this project, as added weight behind it may cause a knock-on effect that will
be very difficult to correct in the future without a deliberate hard-fork, and will cause other problems.

Confer with gmaxwell, he's on freenode IRC #bitcoin channel - or via the forums - to confirm what I'm saying.
He's a in-depth subject expert in blockchain mechanics, and I believe he has the same view - that writing data
to the blockchain as Mastercoin proposes is a dangerous and potentially disruptive force.

Thanks for reading,

TT

Even a hard fork probably couldn't kill MasterCoin. For instance, if bitcoin stopped including transactions to the Exodus Address, we'd simply change reference addresses and keep going. That was an explicit design goal. However we do plan to be a good citizen in our use of the block-chain, and we hope to encode our data in friendlier ways in the future. The worries about blockchain bloat (with some talk of potential improvements) have their own thread over here: https://bitcointalk.org/index.php?topic=284178.0

Thanks!

[hmmmstrange]

Sent to David just a bit ago:

Mastercoin - Protocol Or Blockchain Trojan?

I've read recently that you're defending the Mastercoin project. While this is to be expected considering the
ambitious goals that have been put forward by its creator, I'd like you to please consider the longer-term
implications of what this project means for Bitcoin.

This project is taking an existing resource, the collective hashing power of the entire Bitcoin network, and
exploiting it for its own ends. There is no way to opt-out, unless we hard-fork with another client upgrade.

By treating the blockchain and the transactions within it as a "resource", to collectively read/write data into
the blockchain itself, we have a dangerous precedent -- resource usage that will burden the entire network and
everyone who uses it -- without bearing any gains, except for those using the Mastercoin protocol.

This is alarmingly similar to the behavior of bot-nets, collectively compromised machines (no opt-in, of course)
being exploited to perform other tasks that their users don't condone.

Please reconsider your defense of this project, as added weight behind it may cause a knock-on effect that will
be very difficult to correct in the future without a deliberate hard-fork, and will cause other problems.

Confer with gmaxwell, he's on freenode IRC #bitcoin channel - or via the forums - to confirm what I'm saying.
He's a in-depth subject expert in blockchain mechanics, and I believe he has the same view - that writing data
to the blockchain as Mastercoin proposes is a dangerous and potentially disruptive force.

Thanks for reading,

TT

I see no similarities of mastercoins and botnets.

If you are trying to argue a block chain "bloat" issue:
The block chain belongs to all. Mastercoins contribute to miners' income by means of fees paid. If this en devour leads to issues with the block chain bloat then mastercoin transactions will compete with "normal" bitcoin transactions. Bottom line is, if the bitcoin community wants to protect secondary information from being stored on the block chain, they will have to pay for it by means of bidding up the fees to outbid mastercoin transactions. The block chain is a commodity and the price of said will work itself out.

[dacoinminster]

Ron started a wiki for us!

I don't have the time and I imagine you too, but the wiki is live.
Do you want to fill it out with content first?
My approach would be to just post a message like:

"
Hey guys, we have a <still ugly> wiki at http://wiki.mastercoin.org, feel free to start documenting if you'd like. Right now we need to work on the wiki's homepage, and on an FAQ page, but any contribution you'd like to make is welcome
"

I don't believe in "wait till it's really polished and only then publish it", but rather in "release early even if it's butt ugly, and iterate"

There's almost nothing there now. Anyone who would like to contribute to the project can start editing now. I expect Ron and I will contribute mostly by removing the "MasterCoin is a filthy scam that rapes the blockchain!!" posts, although I hope you guys will help with that too

[moltenmich]

Here's a more developed Mastercoin logo.
They would all be used as the same logo but for different purposes/ on different backgrounds.

[dacoinminster]

I'm a little worried that some of our last-minute investors may get bit by time zones. Please be aware that the fundraiser ends at midnight tomorrow as determined by the block chain timestamp (UTC). If you send an investment when it is still August in your local time, it may not be August anymore on the block chain.

Bitcoins sent to the Exodus Address after that date will not purchase MasterCoins! Inevitably somebody will make this mistake, and I'll have to issue a refund. Please don't be that person.

To be a bit more specific, for people in the U.S., here are your deadlines:
Pacific Time: 5PM 8/31/2013
Mountain Time: 6PM 8/31/2013
Central Time: 7PM 8/31/2013
Eastern Time: 8PM 8/31/2013

A couple other cities:
London: 1AM 9/1/2013
Moscow: 4AM 9/1/2013
Tokyo: 9AM 9/1/2013

[dacoinminster]

"Let's talk Bitcoin" has an episode out today where they interview me about MasterCoin: http://letstalkbitcoin.com/e37-meeting-mastercoin/

Pretty cool . . .

[ripper234]

Ron started a wiki for us!

Thanks, but actually it's someone else (that may want to stay anonymous, so I won't reveal his identity here).
All I did was setup an A record at our DNS

Anyway, people with free time - go and edit it!

[TraderTimm]

Even a hard fork probably couldn't kill MasterCoin. For instance, if bitcoin stopped including transactions to the Exodus Address, we'd simply change reference addresses and keep going. That was an explicit design goal. However we do plan to be a good citizen in our use of the block-chain, and we hope to encode our data in friendlier ways in the future. The worries about blockchain bloat (with some talk of potential improvements) have their own thread over here: https://bitcointalk.org/index.php?topic=284178.0

Thanks!

I'll take a look at the thread you mentioned, but I'm a bit disturbed by your casual deference to addressing the risks involved. I realize you're too close to the whole issue, after all, you're staking your livelyhood on it - but the users of bitcoin in general deserve more than a slight glance at the possible problems you'll cause.

[wizzardTim]

Very interested in this.

@dacoinminster: Can I send you my BTC during August 31st (today)? I was going to send them yesterday, but I have to download the whole blockchain in the qt wallet.

[dacoinminster]

Very interested in this.

@dacoinminster: Can I send you my BTC during August 31st (today)? I was going to send them yesterday, but I have to download the whole blockchain in the qt wallet.

See my note about the deadline a few posts back. The deadline is the turn of the month, UTC. Right now that's just over 24 hours away.

I have reason to believe there will be significant activity on the Exodus Address over the next 24 hours. Also, I WILL BE OFFLINE FOR THE ENTIRETY OF THAT TIME, STARTING IN ONE HOUR

I spend my weekends 100% focused on my family. No exceptions. If a bajillion dollars come in, I WON'T EVEN KNOW until I get online - possibly very briefly Sunday, or possibly not even until Monday.

If that doesn't make me a strange person (especially considering I am a software dev) I don't know what does. But there you have it. I'm a fanatical family man.

I've been getting tons of emails lately with last-minute questions. Starting very soon, those emails will go unanswered (until Monday, when it is too late).

This is of course why I need to hire someone

[solex]

dacoinminster,

Will you at least agree to look at this suggestion which would seems to allay much of the blockchain bloat fears...

Or prefix the data output with OP_RETURN, which is guaranteed to be prunable. If the output is never meant to be spent, then it is irresponsible not to do this.

[dacoinminster]

dacoinminster,

Will you at least agree to look at this suggestion which would seems to allay much of the blockchain bloat fears...

Or prefix the data output with OP_RETURN, which is guaranteed to be prunable. If the output is never meant to be spent, then it is irresponsible not to do this.

Yeah that might work, or as Gavin said, there are presumably a bunch of other ways to encode the data. It's already being discussed on that other thread: https://bitcointalk.org/index.php?topic=284178.0

[dacoinminster]

I have reason to believe there will be significant activity on the Exodus Address over the next 24 hours. Also, I WILL BE OFFLINE FOR THE ENTIRETY OF THAT TIME, STARTING IN ONE HOUR

I spend my weekends 100% focused on my family. No exceptions. If a bajillion dollars come in, I WON'T EVEN KNOW until I get online - possibly very briefly Sunday, or possibly not even until Monday.

If that doesn't make me a strange person (especially considering I am a software dev) I don't know what does. But there you have it. I'm a fanatical family man.

I've been getting tons of emails lately with last-minute questions. Starting very soon, those emails will go unanswered (until Monday, when it is too late).

This is of course why I need to hire someone

Nobody ever believes me when I tell them this, so let me reiterate: this is not a joke. I'm headed offline right now, and will be unreachable (well, except by telephone for those of you who know me that well) for the next 24 hours while last-minute investors are scrambling to get their MasterCoin ducks in a row.

If you are having problems, post here, and please help each other.

See you guys on Monday!

[bbit]

I have reason to believe there will be significant activity on the Exodus Address over the next 24 hours. Also, I WILL BE OFFLINE FOR THE ENTIRETY OF THAT TIME, STARTING IN ONE HOUR

I spend my weekends 100% focused on my family. No exceptions. If a bajillion dollars come in, I WON'T EVEN KNOW until I get online - possibly very briefly Sunday, or possibly not even until Monday.

If that doesn't make me a strange person (especially considering I am a software dev) I don't know what does. But there you have it. I'm a fanatical family man.

I've been getting tons of emails lately with last-minute questions. Starting very soon, those emails will go unanswered (until Monday, when it is too late).

This is of course why I need to hire someone

Nobody ever believes me when I tell them this, so let me reiterate: this is not a joke. I'm headed offline right now, and will be unreachable (well, except by telephone for those of you who know me that well) for the next 24 hours while last-minute investors are scrambling to get their MasterCoin ducks in a row.

If you are having problems, post here, and please help each other.

See you guys on Monday!

I have a feeling he means it!