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

[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.