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

[xuemike]

Maybe someone can help me out with this issue here.
I sent 10 BTC pretty early to the Exodus address with this transaction

http://blockchain.info/tx/b23037c9e680f0f7033f547bc1ddcb7eb08f8170bf7be221d90ad1f21050e2b5

the wallet i sent with using bitcoin-qt was
https://masterchest.info/lookupadd.aspx?address=1589KFRBj95mUZvjoyhTDv9xp89EpHSdh8 has 0 MSC in it.

But in the transaction another wallet was credited with the right amount MSC, and I don't seem to own that wallet.  Can someone tell me what went wrong.

[Tachikoma]

The output with the highest amount of BTC contributed gets the MSC. In your case this is 1Hkjo5N1CLb7XmUtCp4xWRder81CRfpdNd. Most likely this is a change address. You still have the private key for that address in all likelihood. Which client did you use for this transaction?

[alexout]

Should I just hold on to them for now? I dont think I want to sell them but am not up to date on whats going on with mastercoin right now

[xuemike]

The output with the highest amount of BTC contributed gets the MSC. In your case this is 1Hkjo5N1CLb7XmUtCp4xWRder81CRfpdNd. Most likely this is a change address. You still have the private key for that address in all likelihood. Which client did you use for this transaction?

I used bitcoinqt, how do I do a transfer to the main address and how do i find the private key for the change address?

[Tachikoma]

Should I just hold on to them for now? I dont think I want to sell them but am not up to date on whats going on with mastercoin right now

I'm not in the position to give you advise about your investment, that's up to you.

The output with the highest amount of BTC contributed gets the MSC. In your case this is 1Hkjo5N1CLb7XmUtCp4xWRder81CRfpdNd. Most likely this is a change address. You still have the private key for that address in all likelihood. Which client did you use for this transaction?

I used bitcoinqt, how do I do a transfer to the main address and how do i find the private key for the change address?

You can use dumpprivkey from the console to get the private key for that address. You can use the advisor from J.R. to build a transaction that will send the MSC to a address you prefer.

[mishax1]

Tachikoma, we got an opposite situation with the masterchest and the mastercoin explorer..  Masterchest didn't pick up the transaction.

I have sent 10msc to this address in this transaction - http://mastercoin-explorer.com/transactions/4db845e3264b0f141be2b4d11e620ef3fcc6619826d0bb831e0ac2ec7eb881e9

but masterchest doesnt show it - https://masterchest.info/lookupadd.aspx?address=13FHqVZAmkmqW5zFUpqGMHFoGJffx5rqgf

[xuemike]

Should I just hold on to them for now? I dont think I want to sell them but am not up to date on whats going on with mastercoin right now

I'm not in the position to give you advise about your investment, that's up to you.

The output with the highest amount of BTC contributed gets the MSC. In your case this is 1Hkjo5N1CLb7XmUtCp4xWRder81CRfpdNd. Most likely this is a change address. You still have the private key for that address in all likelihood. Which client did you use for this transaction?

I used bitcoinqt, how do I do a transfer to the main address and how do i find the private key for the change address?

You can use dumpprivkey from the console to get the private key for that address. You can use the advisor from J.R. to build a transaction that will send the MSC to a address you prefer.

Thanks!!! I'll give that a try, tonight when I get home.

[Luckybit]

It seems Cunicula has some ideas on this as well. So let me repost his solution and see what everyone thinks.

Decreasing supply to increase price is not impossible, though it is a very delicate matter. I see the following options for decreasing supply:

a) impose demurrage rate on the stabilized asset as in freicoin; (as a grossly inferior substitute txn fees could be used instead)
          i) reissue demurred assets when price is constant (e.g. as mining reward or distribution to someone besides the asset holder)
          ii) destroy demurred assets when price is falling
b) maintain an escrow fund that purchases assets at a fixed exchange rate; the fund is always open to purchase assets until the escrowed funds are exhausted.
c) a mixture of (a) and (b); escrowed coins are returned to the initial asset issuer as demurrage occurs (for the issuer demurrage is interest)

Thezerg's comment is on point here. I am also concerned about the mechanism that rewards asset issuers for creating assets and backing them with escrow funds. Asset issuers need to get a positive risk-adjusted return on their escrowed capital. Demurrage fees could potentially fund this. It is not going to be sufficient to back assets one-to-one. Not with the value of the backing halving and doubling in value from month to month. You will need something like 3 to one backing to be credible. What motivates asset issuers to sink 3 USD worth of BTC into the creation of 1 USD worth of cryptoasset. It's going to have to be demurrage. i.e. the asset has to gradually melt returning its collateral to the asset issuer in the process.

As much as it pains me to give evoorhess credit for anything, he is 99% on point here. Let's go over how a speculative attack works and why it guarantees devaluation of the derivative when its backing falls below parity under certain assumptions (the 1% where evoorhees goes wrong is his failure to state the qualifying assumption (b) [if (b) does not hold, a speculative attack becomes impossible])

Assumptions:
a) I assume that the mastercoinUSD derivative is initially trading at parity. (plan is to demonstrate that this assumption is inconsistent with assumptions 2 and 3)
b) I also assume that the escrow fund is insufficient to back the mastercoinUSD derivative on a one-to-one basis. (fractional reserve)
c) I assume that the attacker can get collateral sufficient to borrow a significant fraction of all existing mastercoinUSD derivatives. He will tempt people into this by offering to pay very high interest rates on the loan.

Executing the attack:
1) The attacker borrows mastercoinUSD derivatives, offering a high rate of interest to anyone who is willing to lend them. If the lenders actually expect (a) to hold in the future, then they should be delighted to accept the high rate of return. If not, then they should be selling mastercoinUSD now and thus assumption (a) could not hold.

2) The attacker now controls a bunch of mastercoinUSD and can exchange them using the escrow fund. He does this, depleting the escrow fund in the process. Other people observe what is going on and start joining the attack either by selling on the market or using the escrow fund to sell. Their participation helps a lot, but is not essential for this to work. In the process, the attackers accumulate the escrowed assets. These will end up as pure attacker profit. The attack continues until the escrow fund is completely exhausted. Exhaustion is possible due to assumption (b).

3) The mastercoinUSD is now unbacked. It is completely worthless paper trading for pennies on the dollar if we were hoping for an IMF bailout and $0.00 under the harder realities of cryptocurrency markets.

4) The attacker's work is done. He purchase up the valueless mastercoinUSD and pay back his mastercoinUSD creditors worthless paper. The hapless holders of mastercoinUSD suffer a total loss.

The key takeaway here is that a 1-to-1 reserve is never going to be credible. Any loss in value of collateral will set off the attack process. The derivative's price will collapse to zero even under a quite small adverse market fluctuation. Suppose we have a 100-to-1 reserve, however. A speculative attack can never happen in this case except under the most extreme circumstances (e.g. the price of collateral falls 100-fold relative to the USD). The problem then becomes how do we get people to spend 100 USD of coin to create an asset which they then sell for 1 USD. It is a thorny problem, but not impossible as evoorhees implies.

For this reason I think one of the biggest challenges Mastercoin will face will be to come up with ingenious incentive mechanisms to encourage the set of investment behaviors which maintain escrow health. I think interest would do that similar to what we saw with MCXNow Feeshares. Those Feeshares originally were around 0.2 and went all the way up to 1 BTC each. The same scenario will happen with Mastercoin only a lot more dramatic.

Mastercoin will at least be worth 3* BTC when everything is running and once derivatives get built onto it it could potentially be worth 20*-30* BTC. I don't predict it can go much higher than 30 BTC a coin unless it's a bubble or in the case where people deliberately hoard it. Generally Mastercoin will produce Asicminer type investment madness but that will only happen if the incentive structure is just right to produce that kind of behavior.

Perhaps Cunicula can comment more on this.

[Tachikoma]

Tachikoma, we got an opposite situation with the masterchest and the mastercoin explorer..  Masterchest didn't pick up the transaction.

I have sent 10msc to this address in this transaction - http://mastercoin-explorer.com/transactions/4db845e3264b0f141be2b4d11e620ef3fcc6619826d0bb831e0ac2ec7eb881e9

but masterchest doesnt show it - https://masterchest.info/lookupadd.aspx?address=13FHqVZAmkmqW5zFUpqGMHFoGJffx5rqgf

Mastercoin-explorer is less strict at the moment then the other implementations, since it does not do some sequence checks. It might be related to that. Best wait for Zathras to come online. It's quite possible his daemon stopped processing new transactions and he simply needs to reboot it. I think this is likely since no new transactions have been added since this morning.

[killerstorm]

I don't know how Colored Coin will offer escrow. Someone will have to explain if it can even do it. But if it does then at some point we will have to add value to it in some organized fashion. So are we going to be buying Colored Coins to feed the escrow or what?

I believe that escrow-backed currencies are ill-conceived idea, and we aren't going to implement anything like this on top of colored coins.

[Luckybit]

I don't know how Colored Coin will offer escrow. Someone will have to explain if it can even do it. But if it does then at some point we will have to add value to it in some organized fashion. So are we going to be buying Colored Coins to feed the escrow or what?

I believe that escrow-backed currencies are ill-conceived idea, and we aren't going to implement anything like this on top of colored coins.

So what backs Colored Coins? I don't understand.

[dillpicklechips]

I don't know how Colored Coin will offer escrow. Someone will have to explain if it can even do it. But if it does then at some point we will have to add value to it in some organized fashion. So are we going to be buying Colored Coins to feed the escrow or what?

I believe that escrow-backed currencies are ill-conceived idea, and we aren't going to implement anything like this on top of colored coins.

So what backs Colored Coins? I don't understand.

BTC. Mastercoin is just moving coins around. You can accomplish the same thing and skip the step of obtaining another currency with colored coins.

[zathras]

Tachikoma, we got an opposite situation with the masterchest and the mastercoin explorer..  Masterchest didn't pick up the transaction.

I have sent 10msc to this address in this transaction - http://mastercoin-explorer.com/transactions/4db845e3264b0f141be2b4d11e620ef3fcc6619826d0bb831e0ac2ec7eb881e9

but masterchest doesnt show it - https://masterchest.info/lookupadd.aspx?address=13FHqVZAmkmqW5zFUpqGMHFoGJffx5rqgf

Sorry guys - same issue as the other day (server ran out of RAM and couldn't page quick enough causing masterchest-engine to throw an unhandled exception), looks like I need to fix this sooner rather than later. 

Resolved for now.  You may see masterchest.info go down for ~30 mins later today as I clone to a more powerful instance.

Thanks!

[mishax1]

Great work! thanks 

[Luckybit]

I don't know how Colored Coin will offer escrow. Someone will have to explain if it can even do it. But if it does then at some point we will have to add value to it in some organized fashion. So are we going to be buying Colored Coins to feed the escrow or what?

I believe that escrow-backed currencies are ill-conceived idea, and we aren't going to implement anything like this on top of colored coins.

So what backs Colored Coins? I don't understand.

BTC. Mastercoin is just moving coins around. You can accomplish the same thing and skip the step of obtaining another currency with colored coins.

No you really can't. Bitcoins are way too volatile. If even the slightest bad news happens then Bitcoin prices can crash. Also most people use Bitcoins as a currency and not for speculation.  

I just don't think you can get enough value into Bitcoin. Why would I trade Litecoins for Bitcoins to use Colored Coins when I can just build Colored Coin on top of Litecoin and its even better?

So now we have two Colored Coins with half the value they'd have if they were one. Every coin will have its Colored Coin implementation, but Bitcoin will have Mastercoin and Bitshares which go far beyond Colored Coin.

With Mastercoin we can put all our value into that one thing, use that one thing as the maximum value on the exchange from which everything else is weighed. We cannot use Bitcoin for that because Bitcoins aren't valuable enough and even if you put every single Bitcoin into an escrow it wouldn't be valuable enough to even be compared to Forex (5 trillion dollar market cap). Bitcoin is just a 2 billion dollar market cap. Litecoin is maybe $50-100 million market cap. Mastercoin has a potential market cap of 180 trillion or perhaps even more than that.

What I mean is, it's true you could probably do it with Colored Coin and have every altcoin have it's own Colored Coin implementation, but I fail to see how Colored Coin can do derivatives. In 2008 the US derivatives market cap was 182 trillion dollars. How much would the price of a Bitcoin be if the market cap were a conservative 50 trillion dollars? Each Bitcoin would go for around 12 million dollars. But I don't think that will happen because I think not enough people own Bitcoins to put that much value into it right now leaving the door open for Mastercoin.

Forex is a 5 trillion dollar market cap. Derivatives were a 182 trillion dollar market cap for just the United States in 2008. Mastercoin is set up to handle derivatives and all the value could be held in Mastercoins while we could still use Bitcoins for our day to day transactions. Colored Coin on the other hand I am skeptical if it can even do derivatives, or smart property, as it seems to be just about doing shares and a decentralized exchange. There seems to be no standard implementation of Colored Coin and no one can even explain how it works or what it is other than in the most abstract way.

You're basically saying every satoshi can be a color? Colorize the coins to give them object properties?

I get that, but I don't see how it will be better than Mastercoin. Even if we use Colored Coin we will have to transfer value to Bitcoin so basically the same value transfer process has to take place only Bitcoin is too politically volatile in my opinion. Something could happen politically and Bitcoin prices could crash overnight as everyone panic sells and acts retarded. We have seen it over and over, but the markets we do not want that.

It makes sense to me to have Mastercoin exist on top of Bitcoin providing stability for Bitcoin in the form of escrow. Mastercoins do not need Bitcoins to obtain their value and can gain value independent of Bitcoin. All the alt coins which depend on Bitcoin are losing value right now, look at clones like Litecoin, or even coins like Peercoin, Primecoin, and any others. Bitcoin is going up because a bunch of people are buying Bitcoins for unrelated reasons and it's negatively affecting the prices of all other coins as people have to get out of those coins to put their money into Bitcoin again.

And that is the problem of backing everything on Bitcoin. It just isn't going to work very well. I think if everything is backed on Mastercoin and a Mastercoin is worth say 3 Bitcoins then why would Mastercoin owners care if the price of Bitcoins go up or down? Mastercoin owners really only have to care about whether or not miners will try and block them or what Bitcoin developers do. Mastercoin owners have to care about what issuers might do and about keeping Mastercoin escrows healthy but they do not have to care about the price of Bitcoin and I think that is a good thing about Mastercoin.

I also think the fact that Mastercoin could be a magnet for value could actually provide massive funding for development which wouldn't exist under Colored Coin. If a single Mastercoin is worth 2 million dollars in a few years then there is no way in hell Colored Coin is going to be able to keep up but also Mastercoin could develop all kinds of businesses around it and useful tools to do things we all want to be able to do but cannot find the developers to build it.

Colored Coin proponents assume developers will somehow go to the Bitcoin money tree and receive funding. Good luck.

[killerstorm]

So what backs Colored Coins? I don't understand.

Colored coins is just a system for tracking ownership of tokens, what these tokens mean is a different matter.

For example, a company can declare that the tokens they have issued represent ownership of stock of that company, and owners of these tokens will receive dividends.

Or somebody might issue tokens which represent ownership of physical gold.

There are many others potential uses... In any case, it is more like a toolkit for ownership tracking, rather than a particular brand of currency.

(Of course, it is also possible to issue tokens which aren't backed by promise of any kind, but just exist like Bitcoin and Mastercoin do.)

[dillpicklechips]

I get that, but I don't see how it will be better than Mastercoin. Even if we use Colored Coin we will have to transfer value to Bitcoin so basically the same value transfer process has to take place only Bitcoin is too politically volatile in my opinion. Something could happen politically and Bitcoin prices could crash overnight as everyone panic sells and acts retarded. We have seen it over and over, but the markets we do not want that.

If a company does an IPO they represent the shares with tokens. Pretend each BTC representing the share is equivalent of 1/100 of a $US cent. Do you really think people care how much that value goes up or down of BTC? No. They will keep it because it represents something else more valuable. The underlying BTC value is just a bonus. As long as BTC network survives so does colored coins. Mastercoin depends on the network too.

[killerstorm]

Colored Coin on the other hand I am skeptical if it can even do derivatives, or smart property, as it seems to be just about doing shares and a decentralized exchange.

Well, for the start, colored coins is a generalization of "smart property" concept which was described by Mike Hearn. Mike described how it applies to physical property like cars and such, but the concept works for digital property as well. But we needed to generalize it to make it more convenient.

Colored coins can be used for derivatives trading. There are several different approaches, ranging from completely centralized to completely decentralized.

[murraypaul]

I don't know how Colored Coin will offer escrow. Someone will have to explain if it can even do it. But if it does then at some point we will have to add value to it in some organized fashion. So are we going to be buying Colored Coins to feed the escrow or what?

I believe that escrow-backed currencies are ill-conceived idea, and we aren't going to implement anything like this on top of colored coins.

So what backs Colored Coins? I don't understand.

BTC. Mastercoin is just moving coins around. You can accomplish the same thing and skip the step of obtaining another currency with colored coins.

No you really can't. Bitcoins are way too volatile. If even the slightest bad news happens then Bitcoin prices can crash. Also most people use Bitcoins as a currency and not for speculation.  

I just don't think you can get enough value into Bitcoin. Why would I trade Litecoins for Bitcoins to use Colored Coins when I can just build Colored Coin on top of Litecoin and its even better?

So now we have two Colored Coins with half the value they'd have if they were one. Every coin will have its Colored Coin implementation, but Bitcoin will have Mastercoin and Bitshares which go far beyond Colored Coin.

But you don't believe anyone could ever clone Mastercoin?
Your arguments seem to be what you want to be true, rather than what seems most likely.

[Luckybit]

If a company does an IPO they represent the shares with tokens. Pretend each BTC representing the share is equivalent of 1/100 of a $US cent. Do you really think people care how much that value goes up or down of BTC? No. They will keep it because it represents something else more valuable. The underlying BTC value is just a bonus. As long as BTC network survives so does colored coins. Mastercoin depends on the network too.

This works only for stuff like shares though. What if I want to create a transaction where I make a bet with you that the price of Bitcoin will be $1000 before December 2014? If you don't believe they'll be over that price then you'll agree to buy the Bitcoins from me thinking that they wont be that expensive by December 2014.

How would a futures contract be possible with Colored Coin?

Colored Coin on the other hand I am skeptical if it can even do derivatives, or smart property, as it seems to be just about doing shares and a decentralized exchange.

Well, for the start, colored coins is a generalization of "smart property" concept which was described by Mike Hearn. Mike described how it applies to physical property like cars and such, but the concept works for digital property as well. But we needed to generalize it to make it more convenient.

Colored coins can be used for derivatives trading. There are several different approaches, ranging from completely centralized to completely decentralized.

Show me how derivatives trading can be done without an escrow? I do not understand where Colored Coins get their value. And don't say from Bitcoin. That is like saying dollars get their value by being dollars. Dollars got their value originally by being backed by gold and now they have no value at all and represent debt. The gold standard at least allowed for dollars to originally be worth a specific price in gold. That gold was used to provide the initial value for the dollar.

Mastercoin is like the gold which is set up to provide the initial value. Mastercoins themselves can be backed by gold itself if you buy Mastercoins with gold bars. Now you have Mastercoins backed by gold bars. Now Mastercoins inherit the value of gold and you can use that value to create an escrow to create gold coins which can actually be redeemed at some time in the future for gold bars because.

I don't understand how Colored Coins get any value at all. Stocks are worthless unless the company is successful and it asks us to trust that the company will be successful for trading stocks is often on faith in the Bitcoin community because it's unregulated and could very well be a scam.

But you don't believe anyone could ever clone Mastercoin?
Your arguments seem to be what you want to be true, rather than what seems most likely.

I'm sure people will fork it but unless they can get just as much value into their cloned coins as the original Mastercoin their protocol wont work at all. Their escrow would never be healthy. It might work as an attack on Mastercoin but I don't see any incentive to doing it other than for pump and dump. I don't see how it would necessarily remove the value put into Mastercoin once that value is put in.

For instance Cunicula confronted this question. He proposed a scheme which utilized demurrage to provide interest for issuers. As long as there is interest there will be a reason to put your value into Mastercoin because that value will have the potential to increase through demurrage over time.

I think it's like with MCXNow. If MCXNow were cloned it doesn't mean everyone who owned Feeshares and who has their coins on MCXNow receiving interest on their deposits would suddenly go to that other clone which couldn't offer nearly as much interest. The end result is that by providing interest you can actually encourage loyalty to the original Mastercoin protocol and maintain escrow health. Mastercoin would be the best place to put your Bitcoins when the Bitcoin price collapses for no reason like it does sometimes, and when the price of Bitcoins rises tremendously like it's doing now then you could switch your altcoin holdings to the stable Mastercoin instead of Bitcoin and then switch back.

The point is that Mastercoin would be the perfect store of value. You can use it to back all kinds of other currencies and smoothly switch from alt currencies to Mastercoin.

The problem with Colored Coin is what do I do if I'm holding a bunch of Litecoins and the price of Litecoins are collapsing while the price of Bitcoins are going up?  I don't want to buy Bitcoins because the price of Bitcoins could collapse back down again soon after I buy it causing me to lose money. So enter Mastercoin, I could buy a bunch of Mastercoins and know for sure the price will be going up and will be more stable than Bitcoins. If I could earn interest on my Mastercoins in some way then it would guarantee that I'd have an incentive to do this in that scenario and every time the price of an alt coin or some other coin collapses I'd be able to go to the Mastercoin safe haven.

When Bitcoin prices collapsed people were putting their Bitcoins into Litecoins and when those collapsed too then people started putting their coins into Asicminer and other stocks. When the centralized stock exchanges went down and the price of Asicminer collapsed then people started putting their coins into MCXFee shares and MCXNow.

People need a place to put their value as investors and they want to have interest. Right now there is the Xbond but you have to rely on a centralized exchanged, or there is Mastercoin.

It could be cloned, it could fail as a project, but if it doesn't and if it's designed to promote loyalty to its implementation of the protocol in the form of interest then if a clone does form that clone would have to recreate the same amount of value, attract the same amount of investment, and pay interest. If it's profitable for investors then they'll probably use both and it wouldn't make a difference. If there were too many clones then people would probably just use the original because there would be no logical reason to use the copy.