Ethereum: 2nd gen cryptocurrency with contract programming, "dagger" hashing

[jimhsu]

I saw this in the github; may be of interest.

-----

 Purchase steps
At start of fundraiser

    User sends value to intermediate Bitcoin address
    Server sends from intermediate Bitcoin address with the following outputs
       

• Ethereum exodus address
[1] The hash160 that is your ethereum address
        [2] The hash160 of your email address
    Store users's email address along with its hash160 in mongodb

2 months later:

    Ethereum looks up your email address and sees if you got a reward

[Lloydie]

.0001 is an absolutely insane starting price for a coin that will eventually have 1 trillion in circulation.

I am also wondering about the statement in the paper and the expected fundraising volume.

Original:
"Ether will have a theoretical hard cap of 2^128 units (compare 250.9 in BTC), although not more than 2^100 units will be released in the foreseeable future."

2^100 = 1,26 * 10^30 = 1 260 000 000 000 000 000 000 000 000 000.

The issuance rule is like that: 0.0001 BTC for 1 Ether.
If people invest all in all 1000 BTC there will be 10 000 000 Ether from fundraising and 50% of that goes to founders/org + 50% to miners per year. So after 1 year you have 20 mio Ether.
If they get 10k BTC at fundraising -> 200 Mio Ether;
If they get 100k BTC at fundraising (100 mio USD!) -> 2 000 Mio Ether;
If they get 1000k BTC at fundraising (1000 mio USD!) -> 20 000 Mio Ether; But thats very unrealistic (10% of btc market cap)
In that caseFor mining there would be added 10 000 Mio per year, if you count for 100 years thats 1 000 000 Mio = 1*10^12.
So even in a highly unlikely scenario of 1 Mio Btc fundraising there would be only about 10^12 in circulation. So what does "not more than 2^100 units will be released in the foreseeable future" refer to? Or was it just a relict form an older version of a fundraising model or Ether nomination?

This is very clever.  But my,"12 year old" doesn't get it.

I have 10 Btc, which I invest. That gets converted to ether. Ok, the founders/org take half and miners take half. What do I get?  Then after one year, the mined coins are rising at linear inflation of 50%? Who gets those?

Thanks.

Can somebody smart and talented answer the dumb kid?

[ThePatient]

What does a 'mastercoin style' fundraiser/auction entail?  


...and the founders shouldn't be getting coins, even if it is in the form of a time-lock contract. 

[Forobitcoins]

interesting
frame

[cre8r]

Very interesting, I hope you will succeed.
I've got one concern: in both Ethereum and Bitcoin transactions are validated and then rebroadcasted by each node. In Bitcoin, transactions are very cheap to validate, and nodes have little to no advantage to refuse checking and broadcasting them. On the contrary, some Ethereum contracts might be quite expensive to execute, and while miners do have the incentive to do this - the transaction fees, which are relatively high, - ordinary nodes don't. If we assume that nodes are rational, they may refuse to evaluate and rebroadcast complex contracts transactions that do not affect themselves, because this would reduce load on their computers and will not result in any penalties.
Additionally, high transaction fees favour selfish mining (http://arxiv.org/abs/1311.0243). I did not review the GHOST blocktrees concept and have no idea if it could protect from the selfish mining attack.

[bitme]

Any estimation what CPU/RAM will be optimal for mining?

[Vitalik Buterin]

Hey all, Vitalik Buterin, founder here.

Vitalik had trouble solving the "fork" issue, that is, that when two forks arise in a PoS coin, there is no incentive for PoS miners to select one over the other.  That is, they are incentivized to mine both simultaneously at the same time.  He thought he may have solved it today, but didn't seem terribly interested in pure PoS, especially because you need to typically do a 100% premine.

There are other people I know who previously wanted pure PoS chains arguing about them for one reason or another now.  I would guess that Satoshi himself/themselves also considered this (as it seems like the more logical means to construct a cryptocurrency network), but abandoned it for whatever reason.

Thanks a lot tacotime for making the thread and representing us. I actually did just formalize the PoS algorithm I had briefly sketched out this morning: http://blog.ethereum.org/?p=39/slasher-a-punitive-proof-of-stake-algorithm .If we get real overwhelming demand to use proof of stake, we will use something like this or something better, but that's not really likely IMO. An interesting idea there would be to also add some kind of proof-of-excellence based distribution model (eg. we'll put 10000 trillion ether into a contract which gives ether to people who solve very hard math and CS problems like integer factorization, AI board game algorithms, etc) so we still have some more issuance over time and aren't 100% premined.

Now, to get to the main point, the issuance model.

First, as mentioned by LeoC, proof of burn is a non-starter for our use case, because PoB cannot be independent. That is to say, with PoB an Ethereum client would need to also have a Bitcoin blockchain and would be dependent on the Bitcoin blockchain for validity checking. I absolutely do not want to have external dependencies in Ethereum - with the obvious exception of people creating SPV clients inside of contracts, which I think is a really cool idea with amazing potential for cross-chain atomic swaps, two-way pegs and the like.

Second, and more importantly, while I do understand the sentiment that cryptocurrency algorithms should be neutral and privilege no specific parties I would like to contest the claim that the concept of neutrality in the context of issuance is both (1) possible and (2) desirable. When you're putting BTC into the Ethereum fundraiser, you're financially empowering and incentivizing an organization that has produced substantial real results already, and is pledged to developing the Ethereum protocol. When you're putting BTC into a proof of burn, through the deflation effect you're effectively donating your money to large BTC early adopters.

When we talk about neutrality and fairness, what we really mean is that we want the currency supply to be distributed among as many large and diverse constituencies as possible. And this is actually the reason why I came up with Ethereum's compromise distribution model. With Bitcoin, the only way to get BTC was mining, and so BTC privileges the class of people with computing power. With Mastercoin, it was buying into the fundraiser, privileging the Bitcoin-wealthy. With Ripple, it's working for Ripple Labs or getting a bit at a giveaway, privileging the founders. With Ethereum, there are many ways to get ether: you can participate in the fundraiser, you can participate in the Ethereum project and receive salaries or bounties, you can mine, and we may potentially even end up doing a giveaway or two. This actually increases fairness compared to the pure mining model, since different groups of people are privileged in each of these categories (people with money, people with hardware, people with connections and development skills, etc) and all of these have a chance.

With regard to the "founders get some for free" factor, what people need to understand is that every currency, including BTC, QRK, MSC and Ripple, so far has privileged its founders in some fashion. The only difference is that in some cases the privilege is more subtle than in others. With Bitcoin, Satoshi got his 0.25X by mining it for a year when nobody else had heard about Bitcoin yet. With MSC, JR got his by running a fundraiser relatively quietly on Bitcointalk and then targeting media attention only after it was over. We are not seeking any avantage through obscurity; we will be targeting the limelight from before the first day that the fundraiser launches.

Ultimately, our ideology with regard to the distribution long-term is this. We believe that centralization and decentralization both have their value, and must be used at the appropriate times. Startups, in practice, generally have to be dictatorial. However, institutions that are at the base level of society should ideally not be controlled by anyone. To that end, the way that we are structuring both the organization and the issuance model is that we will have a large amount of influence at the beginning, but that influence will quickly decay over time as the years progress. Once we release the coin, we will inevitably immediately lose control, and over the next one or two years we even hope to turn the Ethereum organization itself into a DAO, sustaining itself through VC-like investments with ownership spread among thousands of people in the community. It's the same with the profit structure; yes, if Ethereum succeeds, we will profit handsomely, and fundraiser participants will profit handsomely. However, because we have permanent linear inflation, this profit is a one-time fact whose importance in the system will diminish to zero over a sufficiently long period of time. As T approaches infinity, ether becomes zero percent premined. Satoshi, on the other hand, has up to 5% of all BTC forever.

All in all, we believe that we have come up with a very interesting issuance model that combines together the benefits of all of the various models in small doses; we have Ripple-style premining, Mastercoin-style fundraising, but ultimately Bitcoin-style mining dominates over the long term, eventually coming to eclipse every other component of the issuance. It is ultimately up to the community to decide whether or not this issuance model is valuable.

Now, to clarify some facts:

* The founders will not be getting any BTC from the pool. We may get some not particularly high wages to live on, but our financial interest in the project is heavily concentrated in the value of our premine share.
* The founders are not getting 25%. The founders are getting 12.5% after one year when those funds actually become accessible, and the percentage will rapidly dwindle due to supply expansion, becoming 6.25% after 5 years. I'm sure that there exist five people today who together own 6.25% of all bitcoins, and Satoshi alone likely has that much. In Mastercoin, three people have 25%.
* The BTC from the pool will be going entirely to the organization, and we will start using it to pay expenses even as the fundraiser is running in order to get development moving quickly. We have plans on how we can spend money all the way up to $25 million; the higher-end expenses consist of things like Bitcoin Decentral-style incubators, a large amount of funds into cryptocurrency scalability research, funding very high-quality interfaces, decentralized exchanges, and other such infrastructure, and even funnelling money into projects that might work alongside Ethereum (eg. Bitmessage, KryptoKit, OpenTransactions)
* We are not trying to be a highly powerful HFT exchange. We are trying to be a generalized workhorse that can do anything. Identity systems, decentralized Dropbox, sub-currencies, you name it. HFT can be done through either a dedicated chain (eg. BitShares can release an Ethereum contract containing an SPV version of the BitShares blockchain and use that to allow units to move back and forth between the two blockchains, and then do HFT on their own chain) or using a semi-centralized system like OpenTransactions
* We are going to release clients in 3-4 langugaes, likely Python, Go, C++ and NodeJS. The main reason for this is to avoid monoculture from day one and to ensure consistency since it's very unlikely that the same bug will appear in all four.
* We will not put Zerocoin into Ethereum. But what you can do is set up a Zerocoin-based mixer as an Ethereum contract.
* We have not figured out how to do 100% trust-free fiat. The closest we've gotten is doing contracts for difference off of voting pools of price feeds. But even that is a massive improvement over having to trust an issuer.
* We will likely use 3-of-5 multisig to hold our funds. We will be the first cryptocurrency fundraiser that we know of whose exodus address actually has a 3 at the beginning.

[hypersire]

Hey all, Vitalik Buterin, founder here.

Vitalik had trouble solving the "fork" issue, that is, that when two forks arise in a PoS coin, there is no incentive for PoS miners to select one over the other.  That is, they are incentivized to mine both simultaneously at the same time.  He thought he may have solved it today, but didn't seem terribly interested in pure PoS, especially because you need to typically do a 100% premine.

There are other people I know who previously wanted pure PoS chains arguing about them for one reason or another now.  I would guess that Satoshi himself/themselves also considered this (as it seems like the more logical means to construct a cryptocurrency network), but abandoned it for whatever reason.

Thanks a lot tacotime for making the thread and representing us. I actually did just formalize the PoS algorithm I had briefly sketched out this morning: http://blog.ethereum.org/?p=39/slasher-a-punitive-proof-of-stake-algorithm .If we get real overwhelming demand to use proof of stake, we will use something like this or something better, but that's not really likely IMO. An interesting idea there would be to also add some kind of proof-of-excellence based distribution model (eg. we'll put 10000 trillion ether into a contract which gives ether to people who solve very hard math and CS problems like integer factorization, AI board game algorithms, etc) so we still have some more issuance over time and aren't 100% premined.

Now, to get to the main point, the issuance model.

First, as mentioned by LeoC, proof of burn is a non-starter for our use case, because PoB cannot be independent. That is to say, with PoB an Ethereum client would need to also have a Bitcoin blockchain and would be dependent on the Bitcoin blockchain for validity checking. I absolutely do not want to have external dependencies in Ethereum - with the obvious exception of people creating SPV clients inside of contracts, which I think is a really cool idea with amazing potential for cross-chain atomic swaps, two-way pegs and the like.

Second, and more importantly, while I do understand the sentiment that cryptocurrency algorithms should be neutral and privilege no specific parties I would like to contest the claim that the concept of neutrality in the context of issuance is both (1) possible and (2) desirable. When you're putting BTC into the Ethereum fundraiser, you're financially empowering and incentivizing an organization that has produced substantial real results already, and is pledged to developing the Ethereum protocol. When you're putting BTC into a proof of burn, through the deflation effect you're effectively donating your money to large BTC early adopters.

When we talk about neutrality and fairness, what we really mean is that we want the currency supply to be distributed among as many large and diverse constituencies as possible. And this is actually the reason why I came up with Ethereum's compromise distribution model. With Bitcoin, the only way to get BTC was mining, and so BTC privileges the class of people with computing power. With Mastercoin, it was buying into the fundraiser, privileging the Bitcoin-wealthy. With Ripple, it's working for Ripple Labs or getting a bit at a giveaway, privileging the founders. With Ethereum, there are many ways to get ether: you can participate in the fundraiser, you can participate in the Ethereum project and receive salaries or bounties, you can mine, and we may potentially even end up doing a giveaway or two. This actually increases fairness compared to the pure mining model, since different groups of people are privileged in each of these categories (people with money, people with hardware, people with connections and development skills, etc) and all of these have a chance.

With regard to the "founders get some for free" factor, what people need to understand is that every currency, including BTC, QRK, MSC and Ripple, so far has privileged its founders in some fashion. The only difference is that in some cases the privilege is more subtle than in others. With Bitcoin, Satoshi got his 0.25X by mining it for a year when nobody else had heard about Bitcoin yet. With MSC, JR got his by running a fundraiser relatively quietly on Bitcointalk and then targeting media attention only after it was over. We are not seeking any avantage through obscurity; we will be targeting the limelight from before the first day that the fundraiser launches.

Ultimately, our ideology with regard to the distribution long-term is this. We believe that centralization and decentralization both have their value, and must be used at the appropriate times. Startups, in practice, generally have to be dictatorial. However, institutions that are at the base level of society should ideally not be controlled by anyone. To that end, the way that we are structuring both the organization and the issuance model is that we will have a large amount of influence at the beginning, but that influence will quickly decay over time as the years progress. Once we release the coin, we will inevitably immediately lose control, and over the next one or two years we even hope to turn the Ethereum organization itself into a DAO, sustaining itself through VC-like investments with ownership spread among thousands of people in the community. It's the same with the profit structure; yes, if Ethereum succeeds, we will profit handsomely, and fundraiser participants will profit handsomely. However, because we have permanent linear inflation, this profit is a one-time fact whose importance in the system will diminish to zero over a sufficiently long period of time. As T approaches infinity, ether becomes zero percent premined. Satoshi, on the other hand, has up to 5% of all BTC forever.

All in all, we believe that we have come up with a very interesting issuance model that combines together the benefits of all of the various models in small doses; we have Ripple-style premining, Mastercoin-style fundraising, but ultimately Bitcoin-style mining dominates over the long term, eventually coming to eclipse every other component of the issuance. It is ultimately up to the community to decide whether or not this issuance model is valuable.

Now, to clarify some facts:

* The founders will not be getting any BTC from the pool. We may get some not particularly high wages to live on, but our financial interest in the project is heavily concentrated in the value of our premine share.
* The founders are not getting 25%. The founders are getting 12.5% after one year when those funds actually become accessible, and the percentage will rapidly dwindle due to supply expansion, becoming 6.25% after 5 years. I'm sure that there exist five people today who together own 6.25% of all bitcoins, and Satoshi alone likely has that much. In Mastercoin, three people have 25%.
* The BTC from the pool will be going entirely to the organization, and we will start using it to pay expenses even as the fundraiser is running in order to get development moving quickly. We have plans on how we can spend money all the way up to $25 million; the higher-end expenses consist of things like Bitcoin Decentral-style incubators, a large amount of funds into cryptocurrency scalability research, funding very high-quality interfaces, decentralized exchanges, and other such infrastructure, and even funnelling money into projects that might work alongside Ethereum (eg. Bitmessage, KryptoKit, OpenTransactions)
* We are not trying to be a highly powerful HFT exchange. We are trying to be a generalized workhorse that can do anything. Identity systems, decentralized Dropbox, sub-currencies, you name it. HFT can be done through either a dedicated chain (eg. BitShares can release an Ethereum contract containing an SPV version of the BitShares blockchain and use that to allow units to move back and forth between the two blockchains, and then do HFT on their own chain) or using a semi-centralized system like OpenTransactions
* We are going to release clients in 3-4 langugaes, likely Python, Go, C++ and NodeJS. The main reason for this is to avoid monoculture from day one and to ensure consistency since it's very unlikely that the same bug will appear in all four.
* We will not put Zerocoin into Ethereum. But what you can do is set up a Zerocoin-based mixer as an Ethereum contract.
* We have not figured out how to do 100% trust-free fiat. The closest we've gotten is doing contracts for difference off of voting pools of price feeds. But even that is a massive improvement over having to trust an issuer.
* We will likely use 3-of-5 multisig to hold our funds. We will be the first cryptocurrency fundraiser that we know of whose exodus address actually has a 3 at the beginning.

Outstanding! I cannot express how much I am anticipating this release.

Keep up the great work Vitalik!

[panonym]

Thank you Vitalik for joining the topic.

I value your idea, and ultimately your project will be - and start - how you wish it to be.
However I am a bit sad you got influenced by LeoC without thinking twice about what he wrote.
About proof of burn, you two are just wrong.

Let's not mix everything.

First, as mentioned by LeoC, proof of burn is a non-starter for our use case, because PoB cannot be independent. That is to say, with PoB an Ethereum client would need to also have a Bitcoin blockchain and would be dependent on the Bitcoin blockchain for validity checking. I absolutely do not want to have external dependencies in Ethereum

You both are confuse.
PoB is not equal to XCP. Counterparty is only a project using PoB for it's XCP distribution.
While I fully agree XCP cannot be independent, that just doesn't apply to PoB by itself. It's a choice.
LeoC has a fixation on XCP and answered about XCP where I was talking purely about PoB.

Basic example:
You take Next, instead of having an IPO, you start with PoB as only way to get NXT.
You end with a cryptocurrency fully independent from all the other, relying only on PoS for security.
XCP is a metacoin. All metacoin are intrinsically dependent on another blockchain (whatever which one).
PoB is a method for wealth transfer and distribution in trustlessness. PoB is not a coin, even less a metacoin.

Absolutely nothing prevent Ethereum to use only PoB and remain 100% independent. It's a choice.
The reason PoB is a non-starter for most are completely other reason.
The main one are: money & 1-time all-coin-created model.

With regard to the "founders get some for free" factor, what people need to understand is that every currency, including BTC, QRK, MSC and Ripple, so far has privileged its founders in some fashion.

Not every currency. All except one. XCP.
I suppose the top1 reason that make dev disregarding PoB is that there is less quick/easy benefits for themselves & development instant$ reward/salary.
The main problem with PoB is that the dev, the betatester, the investor : EVERYONE is on the same level.
Some see that as a problem, some see it the opposite way, 'a much awaited change.
All have to risk destroying their money for a possible future gain.
The main problem with PoB compare to IPO is that you do not have the possibility of arbitrarily taking x% in order to reserve them for salaries or bounties.
In an over simplified way: dev works for free.
The only income they might get depend on the amount they burn, the work they provide, the success they help to give to their project, the community work toward this project, etc.
For work to be done:
- if bounties or salaries, it is from the dev pocket or from the community donation.
- otherwise it is for free. Dev, outside dev & everyone all helping each other to their level.

IPO & bounties/salaries are very capitalist-based. It's might be free speech (open source) but it's definitely not free beer. Only money matter.
With pure PoB, it's definitely closer to "free speech free beer".
The approach is completely different. It's another mind set. Another approach.

Suppose I'm a outside dev.
If dev chose IPO and made lots of money, sure as hell I wanna be paid for any work I give to help their project.
With pure PoB approach, I tell myself: wow the dev finance everything from the start with their own pocket.
Donation is optional, that make me want to give, at least a tiny little.
Working for free or very low immediate $reward? yes, I don't mind, it's fits my idea ideal.
I wish to support this project that's started on such awesome foundation.
It's a real communitarian project.

As Vitalik wrote "It is ultimately up to the community to decide whether or not this issuance model is valuable."
An issuance model can be more or less valuable.
But more than that, it's the idea that it represent that is valuable or not.
The Style - as I call it - has more or less value.
NXT crappy style of distribution (stopped without warning before end time leading on purpose to bad repartition) -> very bad style.
I deeply love the 100% PoS idea, but the style, the idea-reflected by NXTdev make that Next has absolutely no value to my eye.
It's in total contraction to my idea ideal, therefore I decided to never put money in it.
Missed a x27 train, whatever, at least I stay true to myself.
Of course the real end value is decided by the global community, not by a single individual.
It's up to every single one of you to make your own choice.
To support the idea or style that you prefer. In addition to risk, ROI, etc.

Of course having $25 millions for development will tend to make it move quicker.
It's the same analogy that microsoft vs GNU/Linux, all over again in a new context.
Do you wish to work for microsoft and be sure to be paid now?
Or do you wish to support the fundamental idea behind open source software?
Second option (PoB/no-boutie vs IPO/boutie) will very probably give you less money right now.
Yet imagine if a thousands dev choose the second option!
You can be pretty sure that on middle/long term, if the basic idea/project are good, everyone is gonna be awesomely rich.
The dev, the betatester, the burner, etc.
All on the same level: according to what you burn + the global work/pub/success.

I'm feed up writing about PoB. And most of those still reading are probably too.
So I'm gonna stop talking about PoB.
Just wished to make due correction and share my idea/ideal.
('can redirect people to this post in the future)

When you're putting BTC into a proof of burn, through the deflation effect you're effectively donating your money to large BTC early adopters.

You do not give them anything... Their BTC is not suddenly worth more. It's psychological.
At best it's stay as stable as now for them forever.
If Ethereum goal were really to remplace bitcoin, which actual capacities to do so: then Bitcoin ultimately will lose value compare to ether over time.
Not win. Scarcity alone doesn't fix any value.

Lot's of thing I wish to express about Ethereum itself. (this post was a bit off topic)
But it will be for another time.
I have a life outside this forum.

Anyway, best of luck to your project. Whatever it will concretely be at the end.
There is still space for communication with the community, and many possible amelioration.

[wizzardTim]

What's the expected ROI for early investors?

I mean the total market will have 1 trillion! coins and the early investors cant dump them for years?

Correct me if I am wrong, just want to clarify my perspective!

Overall a great innovation.

[Lloydie]

What's the expected ROI for early investors?

I mean the total market will have 1 trillion! coins and the early investors cant dump them for years?

Correct me if I am wrong, just want to clarify my perspective!

Overall a great innovation.

It appears investors get 0.25 of all ether which is halved after one year to 0.125 of all ether due to first year ether inflation.  If ether increases 8 times in value in bitcoin terms, we make 0% ROI.  

If adoption of ether takes more than 12 months for it to increase 8 fold in bitcoin terms then ROI is negative in year one.

Over five years, ether depreciates by 50% again to 0.625. So, hopefully over that five year period, ether gains in value by more than double in bitcoin terms or if calculated from inception, greater than 16 times in bitcoin terms.

In fiat terms, if bitcoin increases in value by say 20 times fiat in 2014, then ether will need to increase by 160 times! for ether to break even in year 1.

Please correct me if I'm mistaken.

[k99]

"We believe that centralization and decentralization both have their value, and must be used at the appropriate times. Startups, in practice, generally have to be dictatorial. However, institutions that are at the base level of society should ideally not be controlled by anyone. To that end, the way that we are structuring both the organization and the issuance model is that we will have a large amount of influence at the beginning, but that influence will quickly decay over time as the years progress."

Thanks Vitalik for the posting. Looking forward for the brilliant project.

But I still have not find any answer yet for one of the most critical questions for me:
How does Ethereum protect itself from an 51% attack in the bootstrapping phase?

A political (non-economical) motivated attacker (Banks, State) could buy in cheap from day 1 with mining a huge portion, stay silent and use the >51% power when they want to break it down. Some altcoins have been killed in the bootstapping phase by such attacks (probably just by someone wanting to demonstrate that its possible).
I guess Ethereum is on the radar of people in charge of securing the states/banks power and those people will see the huge potential in it. So I guess the threat is much higher than with all those boring alt coins clones we have seen in the last months...

I described some ideas and possible solutions to the above proble here:
http://www.reddit.com/r/ethereum/comments/1v78zi/protection_against_51_attack_in_bootstrapping/

[BldSwtTrs]

Are devs some kind of hippies?

I guess the answer is no since they take 12,5% of every bitcoins so they like money. But why are they treating other people money so badly?

So they worked hard for a good distribution model.
Well, guys I have an idea! Everybody give for free their BTC to the most people they can and the distribution of BTC will be awesome! Phew, that was hard but I think I come with an awesome distribution model.

Tip : money flow where it's treated best. Don't treat so badly your investor money.

[wizzardTim]

What's the expected ROI for early investors?

I mean the total market will have 1 trillion! coins and the early investors cant dump them for years?

Correct me if I am wrong, just want to clarify my perspective!

Overall a great innovation.

It appears investors get 0.25 of all ether which is halved after one year to 0.125 of all ether due to first year ether inflation.  If ether increases 8 times in value in bitcoin terms, we make 0% ROI.  

If adoption of ether takes more than 12 months for it to increase 8 fold in bitcoin terms then ROI is negative in year one.

Over five years, ether depreciates by 50% again to 0.625. So, hopefully over that five year period, ether gains in value by more than double in bitcoin terms or if calculated from inception, greater than 16 times in bitcoin terms.

In fiat terms, if bitcoin increases in value by say 20 times fiat in 2014, then ether will need to increase by 160 times! for ether to break even in year 1.

Please correct me if I'm mistaken.

Who will invest then? The ROI seems much worse than eMunie

[FreddyFender]

...Thanks a lot tacotime for making the thread and representing us. I actually did just formalize the PoS algorithm I had briefly sketched out this morning: http://blog.ethereum.org/?p=39/slasher-a-punitive-proof-of-stake-algorithm...

Slasher looks terrific!
TacoTime gets a shoutout and thanks!
Trolls focus on distribution model and are instant experts... 
Vitalik, hope to be sending code for testnet as soon as it is up for public beta.

Good work all around, can't wait.

[BldSwtTrs]

Trolls focus on distribution model and are instant experts...  

Distribution is an economic topic and knowing how to code doesn't signalize an economic ability.

When one use the worlds profit and fairness in the same paragraph either he is full of shit (most CEOs) or doesn't fully understand what he is talking about (almost everybody else in society).

[Come-from-Beyond]

But I still have not find any answer yet for one of the most critical questions for me:
How does Ethereum protect itself from an 51% attack in the bootstrapping phase?

Here is my idea for ur consideration - http://www.reddit.com/r/ethereum/comments/1v78zi/protection_against_51_attack_in_bootstrapping/ceq456q

[panonym]

(not wishing to spam, 'just informing I edited my post #139.
A long post about PoB, clarifying confusion about it. For those interested. Slightly off topic.)

[Ursium]

Thanks Vitalik for participating in the thread.

I've posted an Open Letter to the Foundation which I hope you'll have time to take a look at: http://www.ursium.com/open-letter-ethereum-foundation/

[k99]

Trolls focus on distribution model and are instant experts...  

Distribution is an economic topic and knowing how to code doesn't signalize an economic ability.

When one use the worlds profit and fairness in the same paragraph either he is full of shit (most CEOs) or doesn't fully understand what he is talking about (almost everybody else in society).

Welcome to my ignore list, Mr. genius.