I predict a lot of strain on the Bitcoin network soon due to Mastercoin

[ripper234]

I have sent this email to a few devs, Gavin asked that we conduct the discussion publicly and we're happy to oblige.

Hi all,

I think you guys are unaware of the rate at which we are accelerating. Hell, my own board of directors (of the Mastercoin Foundation) has more conservative estimates than me ...

However I think that Mastercoin is going to blow up in scale much sooner than we originally planned.

There will be a lot of transactions on it very soon. I think that perhaps in 2-3 months we'll put a lot more strain on the network that SatoshiDice.

We should prepare.

FYI, we have a small $100 bounty for anyone who documents a migration plan off Bitcoin to another dedicated chain. However this is just a backup plan and we don't see this as likely. We want to stay on top of Bitcoin and support its development and usage.

I think we should have a talk about this ASAP - it's in the best interest of both our projects.

I know you all are busy people, let us know when and how and we'll adjust our schedules.

FYI I think we can sponsor or co-sponsor some research into the scalability of Bitcoin itself. What are the current research problems that can increase Bitcoin Scalability? How can we support this effort?

Please add more core developers to this discussion.

Note that this thread is moderated, and trolling will be deleted.

[1715114976]

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[kjj]

Bitcoin is usage-agnostic.  If there are more transactions, maybe that'll finally be the incentive we've been waiting for to establish the proper fee market.

P.S.  Your usage projections are probably nonsense optimistic.

[Luke-Jr]

If 100% of bitcoin users migrated to Mastercoin and used it the same way, would it produce more load on the blockchain, less, or the same?
If more, why?

[bluemeanie1]

I predicted this problem with Color Coins long before Mastercoin ever began.  Check the BitcoinX list.

Ron, stop acting like this is some kind of new revelation.

In other words you're creating some new feature on top of Bitcoin, generating a major performance problem, and then suddenly you act as though we have some natural disaster that we all must come together to solve.

It sounds more like you're breaking Bitcoin.

[Luke-Jr]

I predicted this problem with Color Coins long before Mastercoin ever began.  Check the BitcoinX list.

Ron, stop acting like this is some kind of new revelation.

This thread isn't about who predicted it first, it's about scalability.

[bluemeanie1]

I predicted this problem with Color Coins long before Mastercoin ever began.  Check the BitcoinX list.

Ron, stop acting like this is some kind of new revelation.

This thread isn't about who predicted it first, it's about scalability.

these problems were well understood and clearly stated by myself many months ago.

Im not sure how exactly we pronounced Mastercoin this wonderful new technology while it poses systemic risks to Bitcoin.

In other words, we must now be concerned about the problems Mastercoin is causing, while a small insider group profits from this business.  As in, we fix the problems that are caused by someone's profit motives.  An analogy: some factory finds a way to make Hummus for 2 cents less than the competitor however it kills entire forests.   The factory does it anyway, then pronounces that there is a huge ecological disaster that we all must come together to fix.

[kjj]

I predicted this problem with Color Coins long before Mastercoin ever began.  Check the BitcoinX list.

Ron, stop acting like this is some kind of new revelation.

This thread isn't about who predicted it first, it's about scalability.

these problems were well understood and clearly stated by myself many months ago.

Im not sure how exactly we pronounced Mastercoin this wonderful new technology while it poses systemic risks to Bitcoin.

In other words, we must now be concerned about the problems Mastercoin is causing, while a small insider group profits from this business.  As in, we fix the problems that are caused by someone's profit motives.  An analogy: some factory finds a way to make Hummus for 2 cents less than the competitor however it kills entire forests.   The factory does it anyway, then pronounces that there is a huge ecological disaster that we all must come together to fix.

First, I think you are vastly overestimating how much use mastercoin is going to get.

Second, Luke's first point is the important one here.  Mastercoin isn't much worse than bitcoin, so if every bitcoin user switched to it, load would only increase by a small multiple, which is bad, but not cataclysmic.

Third, mastercoin transactions are easy to spot.  Miners can easily reject them, or insist on larger fees.

[Luke-Jr]

I predicted this problem with Color Coins long before Mastercoin ever began.  Check the BitcoinX list.

Ron, stop acting like this is some kind of new revelation.

This thread isn't about who predicted it first, it's about scalability.

these problems were well understood and clearly stated by myself many months ago.

I'm sure there's a thread you can argue this in, but that's not the topic here.
Frankly, that coloured coins have this problem is obvious, so arguing over who "predicted" it first is a complete waste of time.
I expect Ron will probably delete your trolling (and my responses to it) when he gets back, so save your time and make a new thread.

[bluemeanie1]

I predicted this problem with Color Coins long before Mastercoin ever began.  Check the BitcoinX list.

Ron, stop acting like this is some kind of new revelation.

This thread isn't about who predicted it first, it's about scalability.

these problems were well understood and clearly stated by myself many months ago.

Im not sure how exactly we pronounced Mastercoin this wonderful new technology while it poses systemic risks to Bitcoin.

In other words, we must now be concerned about the problems Mastercoin is causing, while a small insider group profits from this business.  As in, we fix the problems that are caused by someone's profit motives.  An analogy: some factory finds a way to make Hummus for 2 cents less than the competitor however it kills entire forests.   The factory does it anyway, then pronounces that there is a huge ecological disaster that we all must come together to fix.

First, I think you are vastly overestimating how much use mastercoin is going to get.

Second, Luke's first point is the important one here.  Mastercoin isn't much worse than bitcoin, so if every bitcoin user switched to it, load would only increase by a small multiple, which is bad, but not cataclysmic.

Third, mastercoin transactions are easy to spot.  Miners can easily reject them, or insist on larger fees.

or decide which ones they like and which ones they don't, creating an entirely new vista of mining incentives.  All these things were discussed by myself on the BitcoinX list, but they were not addressed because the people driving the conversation weren't interested in how this technology damages the network, they were only interested in how to get it done for their own glorification.

the problem is when you create new 'colors'.  Generally its Num Transactions ^ Num Colors = unusable network.

In general I think the notion of making accommodations for a for-proft project is a serious violation of Bitcoin principles.  Honestly at this point it wouldn't suprise me.

Frankly, that coloured coins have this problem is obvious, so arguing over who "predicted" it first is a complete waste of time.

if it was so 'obvious' why was I the only one on record to point this out?

[mezzomix]

Maybe it's time to be able to have an interface to add custom filters without changing the source code. Thank you for the heads-up - my network support clients (500-1000 connections) will no longer relay TX with inputs or outputs to the 1ExoDus address.

[Luke-Jr]

Frankly, that coloured coins have this problem is obvious, so arguing over who "predicted" it first is a complete waste of time.

if it was so 'obvious' why was I the only one on record to point this out?

Because everyone else knew it was obvious, and didn't need to be pointed out?

[bluemeanie1]

Frankly, that coloured coins have this problem is obvious, so arguing over who "predicted" it first is a complete waste of time.

if it was so 'obvious' why was I the only one on record to point this out?

Because everyone else knew it was obvious, and didn't need to be pointed out?

then why is Ron acting like this is a startling revelation?

[bluemeanie1]

Maybe it's time to be able to have an interface to add custom filters without changing the source code. Thank you for the heads-up - my network support clients (500-1000 connections) will no longer relay TX with inputs or outputs to the 1ExoDus address.

being that Mastercoin is a profit scheme, you could actually charge Ron tolls to relay his transactions.

still think the block chain is 'free', chaverim?

[adam3us]

a migration plan off Bitcoin to another dedicated chain.

You could consider a merge mined side-chain (for security), or an existing altcoin.  If interested in alt-coin route perhaps protoshares/bitshare have some synergy in being a bearer asset related alt.

But if you're going to do it an an alt you dont need to coloring, just directly represent the color.  No need to encode your messages on top of a network that doesnt understand your semantics, if you can extend the protocol.  You can technologically win an arms race with hypothetical anti-color rules, via steganographic arguments, but it doesnt change the network cost, so its zero sum for the anti-coloring and the pro-coloring.

About native color representation freimarkets have done an excellent job of thinking through the minimum new script features necessary for smart-contracts.  I proposed a couple of extensions, and I saw they had the exact same, plus more as they have explored the full set of required features with the minimal, simple and elegant protocol bitcoin script extensions.  (Freimarkets is completely unrelated to freicoin other than name).  Bitshare itself has its own (unpublished?) direct encoded from scratch implementation in the works.

FYI I think we can sponsor or co-sponsor some research into the scalability of Bitcoin itself. What are the current research problems that can increase Bitcoin Scalability? How can we support this effort?

Well this is another solution.  Make bitcoin so scalable that it doesnt matter.  However that is really hard.  Zero-trust offchain is one avenue, but its not clear how or if it can work; there maybe some 'crypto/computation physics' limits.  Unknown so far, but lots of people are interested to see if it could be done.  The existence of satoshi-dice didnt help as a catalyst - the scalability problem is known recognized and very hard, it didnt progress because we're at a technology limit unless and until someone can overcome it.

The problem as I see it is bitcoin has a scaling limit, like transactions per second, which it can support in full p2p bearer form.  It can be scaled but only at the cost of reducing its decentralization.  eg if block sizes go to 1GB, that counts me out of running a full node.  Its an issue because if you can only be a full node, with an OC3 line, most people will be pool mining without validating what they're mining, and then defacto control remains unavoidably central.  These will grow into large companies, be acquired etc.  And then become defacto policy points and they'd just as well sign contracts and stop mining.  OK so committed transactions can till prevent policy by making transactions opaque to miners, but it is not quite ideal itelf.

The other direction is that the minimum transaction value (implied by minimum fee) goes up, and the minimum bandwidth to be a full node stays p2p compatible.  But that implies bitcoin turns into a clearing network.  If its for large transactions its less interesting to users and will either disappear from lack of interest (remain as a whale speculator network?) or be co-opted and shaped by companies with a use for end-of-day clearing transactions - large exchanges, big payment processors.  All user traffic anyway would end up off-chain.  As the off-chain technology does not exist (and we dont know how to do it not for lack of trying), that means the off-chain technology will offer weak semantics: it will have need for central trust in offchain transaction servers, it will have risks of value seizure/account freezes, risks of the transaction server going out of business.  Probably 1 of 3 properties could be fixed, or maybe 2 of 3 (pick any two features conundrum style) if the business even care to try.  Many are "pragmatic" which is an ugly word.

And then where is bitcoin?  In this environment a smart contract is not smart.  Smartness requires final settlement which means strong fungibility (cryptographic blinding/hiding, or defacto).  Without those guarantees, disputes will arise, transactions will be undone by court order, and the usual costs will creep back in and we're back to the status quo of credit card transactions, and not transacting without reputation research, reputation rating of the business world, which is where their high costs of existing revocable payment systems come from.  I dont think most people understand this unfortunately.

As close as I got was committed tx (aka hidden tx), where you can transact with peer level policy decisions even if 99% of the miners were hostile to your transaction completing.  https://bitcointalk.org/index.php?topic=206303.0  

A new idea even triggered by your question is that I think you can reveal without miner censorship of the reveal, which was previously a UTXO compaction limitation.  The reason is peers can broadcast old keys for revealing without fees because they are validatable against previously published data which was already paid for.

(The reason to reveal at all, and not re-spend in hidden form, which is supported is that it increases the UTXO set size because only people receiving the payment know what the transactions mean, it is in fact fully private and anonymous against anyone except people in the transaction path.  The limitation is the velocity of money means that there will over time be many people in the path and they all need to see the full history.  The actual payment is very compact as it is just a key allowing the recipient to identify and decrypt/validate the input transactions.)

Adam

[bluemeanie1]

a migration plan off Bitcoin to another dedicated chain.

FYI I think we can sponsor or co-sponsor some research into the scalability of Bitcoin itself. What are the current research problems that can increase Bitcoin Scalability? How can we support this effort?

Well this is another solution.  Make bitcoin so scalable that it doesnt matter.  However that is really hard.  Zero-trust offchain is one avenue, but its not clear how or if it can work; there maybe some 'crypto/computation physics' limits.  Unknown so far, but lots of people are interested to see if it could be done.  The existence of satoshi-dice didnt help as a catalyst - the scalability problem is known recognized and very hard, it didnt progress because we're at a technology limit unless and until someone can overcome it.

The problem as I see it is bitcoin has a scaling limit, like transactions per second, which it can support in full p2p bearer form.  It can be scaled but only at the cost of reducing its decentralization.  eg if block sizes go to 1GB, that counts me out of running a full node.  Its an issue because if you can only be a full node, with an OC3 line, most people will be pool mining without validating what they're mining, and then defacto control remains unavoidably central.  These will grow into large companies, be acquired etc.  And then become defacto policy points and they'd just as well sign contracts and stop mining.  OK so committed transactions can till prevent policy by making transactions opaque to miners, but it is not quite ideal itelf.

 and keep in mind that the so called 'big names' in Bitcoin actually favor this route because it's a scenario that can be capitalized on.  Thus we repeatedly hear solutions of this sort from those looking to commercialize various aspects of Bitcoin.  Even IBM has been hanging around lately.  Bitcoin is quickly morphing into a traditional payment network.

The other direction is that the minimum transaction value (implied by minimum fee) goes up, and the minimum bandwidth to be a full node stays p2p compatible.  But that implies bitcoin turns into a clearing network.  If its for large transactions its less interesting to users and will either disappear from lack of interest (remain as a whale speculator network?) or be co-opted and shaped by companies with a use for end-of-day clearing transactions - large exchanges, big payment processors.  All user traffic anyway would end up off-chain.  As the off-chain technology does not exist (and we dont know how to do it not for lack of trying), that means the off-chain technology will offer weak semantics: it will have need for central trust in offchain transaction servers, it will have risks of value seizure/account freezes, risks of the transaction server going out of business.  Probably 1 of 3 properties could be fixed, or maybe 2 of 3 (pick any two features conundrum style) if the business even care to try.  Many are "pragmatic" which is an ugly word.

 my system solves all these problems by eliminating PoW and instead granting the ownership of the chain to new kind of layout.  Any kind of assets can be traded and other financial features can be employed with no problems of scalability or cost of computing equipment.  You lose the so-called 'zero trust', gain performance, and keep the distributed nature of the block chain.  You don't have to do transactions 'off chain', everything gets fully committed very quickly.

 all these problems were entirely visible to me months ago, which led to the development of Confidence Chains.

 -bm

[Sukrim]

If 100% of bitcoin users migrated to Mastercoin and used it the same way, would it produce more load on the blockchain, less, or the same?
If more, why?

If distributed markets are implemented, I would predict more, as there would not be only transactions for transfers of currency, but also transactions for posting trading offers and executing these trades.

I'm unsure if these order books are supposed to end up in the blockchain (e.g. in Ripple they do, but the ledger there is constantly pruned because of that) or not, in any case it might cause strain if they use the network to message each other about offers and the memory pool explodes.

[jgarzik]

I have long been a proponent of a merge-mined "data chain" which is specifically designed for smart property, colored coins, and mastercoin metadata.

Even did a tiny bit of work creating an (unseen to the public) "DataNet" codebase, whose work is both obvious and long since outdated.

The keys are

• Emphasize tech neutrality, and engage other projects outside MasterCoin to use the data chain.  Even up to and including patch contributions to third party projects.
• Approach pool operators, request merged mining of this chain.  Point out how it's a community chain.
• Do not premine, or other scamcoin traits.
• Be very explicit about intended chain uses, and aggressively work with pool ops to de-spam.

[NewLiberty]

Third, mastercoin transactions are easy to spot.  Miners can easily reject them, or insist on larger fees.

So long as this is maintained, the mining market can fix itself and compete for mastercoin txs.

[adam3us]

bitcoin [...] can be scaled but only at the cost of reducing its decentralization [...then...] most people will be pool mining without validating what they're mining, and then defacto control remains unavoidably central.  [...]  then become defacto policy points and they'd just as well sign contracts and stop mining.

 and keep in mind that the so called 'big names' in Bitcoin actually favor this route because it's a scenario that can be capitalized on.  Thus we repeatedly hear solutions of this sort from those looking to commercialize various aspects of Bitcoin.  Even IBM has been hanging around lately.  Bitcoin is quickly morphing into a traditional payment network.

Other than the committed tx defense, if they try to centralize it, and introduce dispute resolution, taint tracing as an analog of credit scoring, they will damage fungibility, increase transaction costs via the credit scoring management tax they extract, and the payment repudiation they may seek to introduce.  Eg take a look at this

http://www.forbes.com/sites/kashmirhill/2013/11/13/sanitizing-bitcoin-coin-validation/

Its based on significant misunderstands about bitcoins value proposition - destroy its fungibility and the costs float up to meet credit cards and paypal.

If they want to certify users, they should do that as optional KYC, AML certificates that regulated merchants in respective jurisdictions can request, which are attached to wallets/identities, not to fully fungible coins.  The certificates should be non-transistive they attest to the identity of the funds.  They should be optionally sent - if the recipient does not request it, it is privacy destructive and a security risk to send identifying information to unregulated businesses and individuals.

[...Confidence Chains...] my system solves all these problems by eliminating PoW and instead granting the ownership of the chain to new kind of layout.  Any kind of assets can be traded and other financial features can be employed with no problems of scalability or cost of computing equipment.  You lose the so-called 'zero trust', gain performance, and keep the distributed nature of the block chain.  You don't have to do transactions 'off chain', everything gets fully committed very quickly.

I put some comments about confidence chains idea on the thread about it:

https://bitcointalk.org/index.php?topic=317114.msg3581752#msg3581752

I think it has the same problems as other consensus systems like ripple, and the existing banking infrastructure in terms of sybil attack (identity theft), reputation management (equivfax etc) and fraud (when people prove unworthy of their default reputation, succeed in committing identity theft, or commit fraud).

These are issues bitcoin mining is intended to defend against.  Most attempts to save the cost of mining reinvent ripple and come to the realization that mining is performing a critical security function.  Mixed PoW/PoS of PPCoin maybe an exception.

Adam

[bluemeanie1]

bitcoin [...] can be scaled but only at the cost of reducing its decentralization [...then...] most people will be pool mining without validating what they're mining, and then defacto control remains unavoidably central.  [...]  then become defacto policy points and they'd just as well sign contracts and stop mining.

 and keep in mind that the so called 'big names' in Bitcoin actually favor this route because it's a scenario that can be capitalized on.  Thus we repeatedly hear solutions of this sort from those looking to commercialize various aspects of Bitcoin.  Even IBM has been hanging around lately.  Bitcoin is quickly morphing into a traditional payment network.

Other than the committed tx defense, if they try to centralize it, and introduce dispute resolution, taint tracing as an analog of credit scoring, they will damage fungibility, increase transaction costs via the credit scoring management tax they extract, and the payment repudiation they may seek to introduce.  Eg take a look at this

http://www.forbes.com/sites/kashmirhill/2013/11/13/sanitizing-bitcoin-coin-validation/

Hi Adam,

  There was a thread about this on this forum: https://bitcointalk.org/index.php?topic=332918.0

  Clearly the 'Bitcoin Business' wants to move this thing in this direction.  At best, we'll be left with something like SWIFT or ABA.  If transaction costs rise to or above the general costs of using eg. Paypal, you will see a drastic reassessment of Bitcoin's business case, and BTC exchange rate.

  It's really about the way this business sector is constructed.  It's not really about vending software per se, because the systems vendors are in bed with the banks and they dont simply deliver technology, they deliver privilege and part of that tactic is making sure that most people do not have access to the basic tools of finance.  Most people never realize how much money banks make off transaction fees.  If you want to build a financial exchange there are really only one or two companies you can go to.  I used to be a infrastructure consultant for AIG on Wall St. btw. 

  Confidence Chains aims to change all this.  You can run full fledged exchanges on them, and intend to deliver this functionality as open source.

Its based on significant misunderstands about bitcoins value proposition - destroy its fungibility and the costs float up to meet credit cards and paypal.

Im not sure its based on misunderstands.  Probably a better term is 'based on a undermining of Bitcoin's value proposition'.  This subversion of Bitcoin's values has been going on for some time now.

If they want to certify users, they should do that as optional KYC, AML certificates that regulated merchants in respective jurisdictions can request, which are attached to wallets/identities, not to fully fungible coins.  The certificates should be non-transistive they attest to the identity of the funds.  They should be optionally sent - if the recipient does not request it, it is privacy destructive and a security risk to send identifying information to unregulated businesses and individuals.

[...Confidence Chains...] my system solves all these problems by eliminating PoW and instead granting the ownership of the chain to new kind of layout.  Any kind of assets can be traded and other financial features can be employed with no problems of scalability or cost of computing equipment.  You lose the so-called 'zero trust', gain performance, and keep the distributed nature of the block chain.  You don't have to do transactions 'off chain', everything gets fully committed very quickly.

I put some comments about confidence chains idea on the thread about it:

https://bitcointalk.org/index.php?topic=317114.msg3581752#msg3581752

I think it has the same problems as other consensus systems like ripple, and the existing banking infrastructure in terms of sybil attack (identity theft), reputation management (equivfax etc) and fraud (when people prove unworthy of their default reputation, succeed in committing identity theft, or commit fraud).

These are issues bitcoin mining is intended to defend against.  Most attempts to save the cost of mining reinvent ripple and come to the realization that mining is performing a critical security function.  Mixed PoW/PoS of PPCoin maybe an exception.

Adam

Thanks for the comments.  I'll respond to the Confidence Chains points in the other thread just to keep things readable.  This isn't a Confidence Chains thread and I try to be respectful on this forum.  You make some salient points.

go here to follow this discussion:  https://bitcointalk.org/index.php?topic=317114.new;topicseen#new

thanks Adam,

-bm

[ripper234]

I have to apologize for my very brief response ... I've been getting an average 4 hours of sleep a night for 10-14 days.
I will get some of our devs to kick in.

I also have to apologize that these ideas are a bit extreme.
I must say that thus far the board has a general agreement on our goals, but not yet on the degree of the network effects in play here and thus on our speed. I'm the most optimistic one there, the scale I predict can come a bit later than sooner.

In the meantime, I'll summarize why I believe MSCs are going balistically up in value:

• I have a certain vision for Mastercoin, inspired originally by Invictus Innovations (I won't go into comparing us on here). I believe that Mastercoin is not a "Forex Exchange" equivalent. Instead, we are an Autonomous Application that has the goal of producing infrastructure components required for Autonomous Application. David Johnston will soon release a detailed whitepaper exploring AAs.
  
• I believe we have a lot of factors that cause us to increase our first, second, third derivatives of our momentum. Meaning we have a big momentum, but I'm directing that momentum towards features that will increase our momentum, and will cause a self-feeding loop of acceleration
• I believe that our stock price and thus available resources will increase due to the above acceleration loop / self perpetuating prophecy, just like Bitcoin is a self-perpetuating prophechy. I am actively seeking people to take money away from us and spend it wisely for the betterment of Mastercoin. I also believe there are opportunities for people to start a variety of different business (centralized or AAs) on top of our platform, and that any such business that relies on Mastercoin in turn will increase the value of Mastercoins.
  
• In the end - I think we do not yet have the tools to explain or understand why MSC will rise in value and attract capital. I have my vision, we're trying to codify that up in documentation, videos, etc. If we do continue attracting captial and human resources, then of course we'll increase the number of transactions because there will be a lot more types of transactions.
  
• We would be happy and willing to sponsor resesarch that investigates Bitcoin scalability, both in general, and specific to Mastercoin. We really are trying to interoperate with Bitcoin, and believe that a higher MSC price means a higher BTC price. If you have a concrete research proposal, please send it to info@mastercoin.org
  
• Of course I might be delusional and/or wrong. We are working on defining and validating this ... I expect we'll have much more to add on this in a month. FYI I will be presenting in the Vegas conference in the December. The Israeli Mastercoin Foundation also has a meetup for this Thursday. The meetup will be conducted in English, videotaped, and perhaps even turned into a live webinar. It takes place on 5 PM GMT on Nov 22

I'll follow up on this in a day or two.

Thanks for everyone's serious attention.

[tacotime]

My thoughts are that Mastercoin will likely destroy itself by pushing the network fees for transactions up until no one wishes to make any Mastercoin related transactions due to the price associated with them.

This will be an especially big problem as soon as people begin forking Mastercoin en masse.

The unfortunate fact is that as more and more actual transactions to exchange bitcoins go on, eventually there's going to be less and less room on the blockchain for Mastercoin.  It's a system with planned obsolescence.

[DeathAndTaxes]

My thoughts are that Mastercoin will likely destroy itself by pushing the network fees for transactions up until no one wishes to make any Mastercoin related transactions due to the price associated with them.

This will be an especially big problem as soon as people begin forking Mastercoin en masse.

Sounds like a self correcting problem.   The solution is a merge mined separate chain. If MC does implode under its own created tx "spam" then hopefully the outcome will encourage others that follow to a better solution.

[tacotime]

My thoughts are that Mastercoin will likely destroy itself by pushing the network fees for transactions up until no one wishes to make any Mastercoin related transactions due to the price associated with them.

This will be an especially big problem as soon as people begin forking Mastercoin en masse.

Sounds like a self correcting problem.   The solution is a merge mined separate chain. If MC does implode under its own created tx "spam" then hopefully the outcome will encourage others that follow to a better solution.

Agreed -- and probably we will see that soon enough.

[StewartJ]

Not sure if this is related to the Scalability Issue of Bitcoin you have been discussing,
but I happen to come across this article title:

"Bitcoin Needing to Scale by a factor of 1000 to compete with Visa, here's how to do it..."

Link: http://www.washingtonpost.com/blogs/the-switch/wp/2013/11/12/bitcoin-needs-to-scale-by-a-factor-of-1000-to-compete-with-visa-heres-how-to-do-it/

Talks about how Bitcoins needs to be faster for future transaction volume, and how that is being worked on.

Stew

[bluemeanie1]

My thoughts are that Mastercoin will likely destroy itself by pushing the network fees for transactions up until no one wishes to make any Mastercoin related transactions due to the price associated with them.

This will be an especially big problem as soon as people begin forking Mastercoin en masse.

Sounds like a self correcting problem.   The solution is a merge mined separate chain. If MC does implode under its own created tx "spam" then hopefully the outcome will encourage others that follow to a better solution.

weve already discussed this as well.

if you use an altchain, then you can redesign the TX formats.  No need for special Mastercoin or even Color Coin stuff, and certainly no need to invest in MSC.

[ripper234]

Thanks D&T, I think we'll start investigating and detailing what it means to do merged mining for Mastercoin.
I'm proposing to increase the bounty for this btw.

I asked Vitalik Buterin to look into it, anyone else can contribute their opinion.

The current focal point for that discussion is the Trello card (we can also move to a dedicated thread on bitcointalk if someone opens it).

[Peter Todd]

Thanks D&T, I think we'll start investigating and detailing what it means to do merged mining for Mastercoin.

Merge mining Mastercoin is an awful idea and will make Mastercoin significantly less secure. Unfortunately merge mining just means that attacking your chain becomes something miners can do for free - unless you have a majority of hashing power merge-mining your chain you are not safe.

I strongly recommend that Mastercoin stick with the current, secure, design.

[ripper234]

Thanks D&T, I think we'll start investigating and detailing what it means to do merged mining for Mastercoin.

Merge mining Mastercoin is an awful idea and will make Mastercoin significantly less secure. Unfortunately merge mining just means that attacking your chain becomes something miners can do for free - unless you have a majority of hashing power merge-mining your chain you are not safe.

I strongly recommend that Mastercoin stick with the current, secure, design.

We plan to stick with the current design as long as it's possible.

However threads such as this show we must prepare for a scenario where the Bitcoin network rejects us to some degree. Merged mining is a possible interim compromise.

[ripper234]

FYI, I added this bounty (no specific bounty amount, let us know how much you want for this analysis):

https://trello.com/c/CrTosrYl/56-long-term-scalability

We need a page describing the eventual scalability of Mastercoin.

How many transactions per second can the network sustain? How fast this number is expected to grow? What are our main challanges? What about Lite Mastercoin Clients?

Something like https://en.bitcoin.it/wiki/Scalability

This task is left for someone qualified to take and propose a suitable bounty.

[Peter Todd]

FYI, I added this bounty (no specific bounty amount, let us know how much you want for this analysis):

https://trello.com/c/CrTosrYl/56-long-term-scalability

The scalability of Mastercoin - whether or not it uses merge-mining - is a very similar question to the scalability of Bitcoin itself. I'd be interested in taking this on. What kind of timeline do you want an analysis finished by?

[ripper234]

FYI, I added this bounty (no specific bounty amount, let us know how much you want for this analysis):

https://trello.com/c/CrTosrYl/56-long-term-scalability

The scalability of Mastercoin - whether or not it uses merge-mining - is a very similar question to the scalability of Bitcoin itself. I'd be interested in taking this on. What kind of timeline do you want an analysis finished by?

The sooner the better?

We're very flexible. You can give us different price quotes for different timelines.

[tlr]

The problem as I see it is bitcoin has a scaling limit, like transactions per second, which it can support in full p2p bearer form.  It can be scaled but only at the cost of reducing its decentralization.  eg if block sizes go to 1GB, that counts me out of running a full node.  Its an issue because if you can only be a full node, with an OC3 line, most people will be pool mining without validating what they're mining, and then defacto control remains unavoidably central.  These will grow into large companies, be acquired etc.  And then become defacto policy points and they'd just as well sign contracts and stop mining.  OK so committed transactions can till prevent policy by making transactions opaque to miners, but it is not quite ideal itelf.

I haven't thought this through completely, but what if we had some sort of hybrid Bitcoin proof-of-work and Ripple-style consensus system, whereby miners could query multiple full nodes which are known to be "unlikely to collude to defraud us" to check validity?

[Realpra]

Sounds like a self correcting problem.   The solution is a merge mined separate chain. If MC does implode under its own created tx "spam" then hopefully the outcome will encourage others that follow to a better solution.

Agreed.

+ I never understood colored coins; Bitcoin works because its a self-contained system - MasterCoin and such supposedly give you ownership over other stuff/stocks/gold or such... which means you rely on the state to make your claims in the end... a state that has zero motive to help you.

Decentralized stock exchanges are also a problem because once you have the startup stock money you have zero incentive to pay dividends - unless again you bring in the state, in which case you may be better off using regular exchanges.

I would like it to work, but I don't see it.

[adam3us]

Bitcoin works because its a self-contained system - MasterCoin and such supposedly give you ownership over other stuff/stocks/gold or such... which means you rely on the state to make your claims in the end... a state that has zero motive to help you.

You rely on the custodian who holds the asset as backing for the colored coin (xcc)/mastercoin (msc).  However if the asset represents a bearer share in a company you dont trust anyone.
You know that share buy backs and fresh share issues are not the normal way that you redeem company stock - you redeem it by selling it to someone else.

Decentralized stock exchanges are also a problem because once you have the startup stock money you have zero incentive to pay dividends - unless again you bring in the state, in which case you may be better off using regular exchanges.

You are not thinking for enough ahead.  The company transacts entirely in bitcoin, its shares are represented in color coin.  The dividend payment subject to shareholder approval (holding colore shares gives you the right to vote proportionally) and measured against the share prospectus shareholder vote threshold, defines the dividend.  Ownership of the shares definitionally grants you authority over the dividend amount.  The company is powerless to renege.

Same for the entire banking & finance ecosystem and governmental policy.  Its in the constitution (a countries prospectus) they cant change it without a super-majority vote defined as part of the constitution.

This is why smart-contracts are the future.

Obviously second and third generation of scripting is required for such things, but thats the direction IMO.  So you have to architect to that assumption.

Adam

[djohnston]

I'm actually pretty optimistic that the Master Protocol and the Bitcoin Protocol can co-exist and even benefit each other.

I was very glad to see Gavin include the Provably Prune-able Outputs in 0.9 of the Bitcoin client and the Master Protocol devs adopt this as their preferred method for embedding meta data in the block chain.

I cover this topic a bit in my white paper on Decentralized Applications and how they are evolving on top of the existing blockchains.

https://github.com/DavidJohnstonCEO/DecentralizedApplications

I agree with some of the comments here that it will be interesting to see how the miner fees get worked out for those that host "archive nodes" as Gavin terms that, that keep a complete unpruned record.

[alphaBar]

Do these scalability issues make the Bitcoin blockchain poorly suited as an all-encompassing protocol layer for supporting non-currency related applications? Maybe the TCP/IP analogy is flawed. I'm starting to see why the Litecoin devs are pushing to position the "liteness" of Litecoin as a competitive advantage...

[coinrevo]

as of now the "strain" on the network is exactly 0.000%. yes, the TCP/IP analogy is heavily flawed in so many ways, but probably not in the way you might think. finance is very complicated and has evolved over many centuries. the fact that we have now a global virtual currency, does not at all mean we will have a global stock/bond/commodities/currency/... market anytime soon, although that is the current meme. I'm not trying to comment on mastercoin and the other efforts, so not to talk my own book, but its puzzling to me what people believe these systems are doing.

[ripper234]

I was a bit hyperbolic in my optimism regarding our pace of progress, I a bit.
You should see our development pace quicken significantly next months, our team is ramping out quite nicely.

[d'aniel]

finance is very complicated and has evolved over many centuries. the fact that we have now a global virtual currency, does not at all mean we will have a global stock/bond/commodities/currency/... market anytime soon, although that is the current meme.

I agree that the "Cryptocurrency 2.0" meme is a bit over the top.  Though if we get some reliable oracles operating and the relevant scripts made standard, then I can imagine a reasonably successful predictions market springing up.  Intrade showed there's demand for this, and it being rubbed out by USG has left a vacuum.  Incidentally, this could also be used to insure bitcoins against FX risk, provided volatility isn't too crazy.

[coinrevo]

d'aniel. you need clearing. that's hard to do. mastercoin and others don't do clearing. you can't really transfer goods this way. say I want to sell you 1 ounce of gold. how do you make sure you know I have it, and they you are going to be in possession after the transaction? somebody is going to safely store the gold in a vault. then I have to physically hand it over to you, or someone you trust. also you want to make sure that nothing goes wrong during the transaction. in bank-less societies this is part of the counterparty risk.

frankly, not even the largest commodities exchange in the world, CME, has a perfect answer, as they are e.g. gaming their silver holdings. and some of the largest central banks in the world are lying about their gold holdings. this shows you its a highly non trivial matter, although it might seem easy.

with synthetic markets (swaps, prediction markets), you have the problem you don't have really natural supply & demand, as goods never change hands. its a betting market on real exchanges. what we need is a real exchange of goods and services, not gambling markets (which have their use cases).

[d'aniel]

You actually don't need any kind of clearing for the predictions market I mentioned; it can all be done with Bitcoin scripts, and one or more reliable oracles who don't even need to be active participants in transactions.  Here's a nice explanation: https://bitcointalk.org/index.php?topic=260898.msg2804469#msg2804469

Sure, a decentralized predictions market would rely on external infrastructure for actual price discovery of assets, but being able to gain financial exposure to these without needing verified accounts on centralized exchanges seems useful to me.

[coinrevo]

I know you don't clearing for swaps. but swaps doesn't produce much meaningful economic activity and there all kinds of problem with them. if prices move too quickly there can be negative overhang which breaks the system (margin calls). to prevent this you can do these as binary options. btcoracle does this, and guess what - there system is being gamed, and the price you get are horrible.

for "oracles" you need to trust servers anyway, so this is kind of pointless (and completely inefficient at scale). there is no such thing currently, and to make them work you need a lot of things which haven't been invented yet. too much talk, too little code that actually works.

[d'aniel]

The oracle scheme I linked to is "m-of-n" compatible, and has O(1) scaling with the number of participants in a given bet.  It's just simple publishing of secrets and their hashes.  Furthermore, you could build a transaction based on this today using the rawtransactions API and Eligius to get it mined (it's currently non-standard).

[coinrevo]

1. all that an exchange does is: a) establish a price by aggregating orders in a continuous auction b) exchange goods after orders are matched. what Peter is suggesting doesn't solve either of those problems. he has a theory, but not the code. same as all the other attempts in this direction (mastercoin, bitshares, ethereum, OT). otherwise, prove me wrong: I bet 1 BTC that BTC will close under 1000$ this month on bitstamp at 1.8x. any bids? see, exchanges without price discovery are not exchanges.

2. without external inputs smart contracts are worthless. you can't run this on p2p nodes.

3. this is not O(1). order matching is time-dependent.

again, there are some very basic concepts missing which are obvious to people who have worked in the field. a good start is a good book on exchanges, i.e. auction systems. usually it also takes a couple of years to acquire the necessary concepts in practical microstructure of auction, to understand the issues such as latency, reference prices, etc. etc.

I can tell you what P2P scheme works for certain asset classes, but its simply impossible to do this for liquid public assets as of now.

[d'aniel]

All I was focusing on is a way to enable people to make bets with strangers with minimal trust.  After that, people can find each other via whatever channels they like.

But I agree with you that a decentralized exchange will be terrible for efficient high volume trading and price discovery - it would do best to rely on centralized transaction servers for this.  There I think the focus for improvement should be low-trust operation (e.g. Open-Transactions (I thought it did have functioning exchanges?  Haven't checked personally.), and MPC*).

* http://fc09.ifca.ai/papers/15_Secure_MPC_goes_live.pdf