[ANNOUNCE] The Proposal for EnCoin

[Etlase2]

Clearly, I don't feel qualified to really come to terms with most of those details. But I can offer what (I think) are insights.

I always visualized your reputation idea as two layers. You have FreeNets which gain reputation as a whole. And you have individuals, who are ranked (for lack of a better term) by their FreeNet Peers. To make a lame example, I may be a "made man" in the Italian Mob. But if I quit and go to the Russian Mob, my rank doesn't necessarily travel with me.

5-2
"Peers gain reputation in a similar manner as FreeNets: firstly, be apart of a FN that creates a block; secondly, the peer must be present and sign the new Primary Block at the time of creation—and a point of reputation is gained. Peer reputation is used as a minimum requirement to join more reputable FreeNets. "

I was presuming, the FreeNet reputation dictated the total number of coins the FN could generate in a block. And the intraNet rank somehow affected how those coins were split among members.

8-3
"While the payout structure itself is TBD, the biggest, fastest hashing machine will not be rewarded as much as they would hope. It will be based on a set percentage given to the final placement of each peer’s best hash value. For example: you could throw the biggest super computer in the world in a FreeNet, but if the winning hash value only gets 20% of the pot, this supercomputer is subsidizing everyone else in that FreeNet.

So this encourages people to simply use their normal, everyday computer for making coins. There is little incentive to build a massive, 4x GPU machine to mint coins faster. It will not benefit you much, and the costs of the hardware may take years to recoup."

I realize there is a lot to take in, but this did have its own sub-section under the section "Energy Equilibrium", something that might sound like required reading before arguing that the system has major flaws. Someone getting 3mh/s for 200W is going to be subsidizing someone getting 2mh/s for 220W, and in the end this cancels out someone getting 2mh/s for 180W.

Anyways, one of the reasons I want to randomize freenets more is so that there can't be a freenet of just 190W people or one supercomputer and a bunch of duds. You can't know who you're up against, so you don't have data to manipulate the system.

So if a FreeNet is 100% available and 100% accurate for some period of time, they reach a max Reputation. I know you had said validation/confirmation errors would really hammer a FreeNet's reputation. I began wondering if it should be a death penalty. That seemed overkill at the FN level.

Which is somewhat why I want to switch to this system. The freenet rep no longer has any bearing except minimum user rep to join. If a user does something irrationally bad, they get like -1000 rep and whatever coins they have on that account. -1000 rep so they can't join other networks with the same wallet. Not that it matters since they can just use a new wallet, but perhaps an IP address can be added to that list. And -1000 so that it can eventually go back to 0 so that it doesn't stay on the list forever and waste bandwidth.

Also, in the revised design, I'm planning on having it so that only one user signs anything for a set period of time (I'm thinking 3 hours) with a private key only they know. Which user is determined randomly each time so that there could not be collusion between freenets to try to sign an invalid transaction. If he tries to sign something the freenet doesn't agree on, they immediately notify the rest of the network. If he is disconnected for more than say, 2 minutes, he'll lose some rep as the FN needs to get a new member to be the signer and notify the other networks.

I'm also thinking the MerchNets will hide behind the freenets (I'm calling them corenets in the next proposal per your suggestion). As in, their IPs won't be publicly available. In the future, in a stable economy, merchnets should dominate the reputation. If most of their IPs are not casually available, it should be a lot more difficult to successfully DoS the network.

I was never able to identify any other power a 51% majority gave a malicious group.

They could change whatever they wanted in the PB. Clients not connected to the network at the time wouldn't know. It's a very unlikely possibility, but if it did happen, there had to be a way to stop it. Having randomized freenets makes it an even more impossible situation. the "signer" could be evil, but all that will accomplish is wasting time to consensus.

For the MerchNets, I'm pretty sure they are going to gain rep based on how much in tx fees their account receives (and amount of time in a merchnet). The higher up in merchnet, the greater a % of the transaction fees refunded, but the more minimum amount is required to be in your account. Thus, do evil, lose account balance. muahahaha. Plus it creates demand by forcing merchants to save some money in ENC. Brilliant! imho

One problem I see though is merchants might not like users being able to see their account balances. I suppose the ability need not be added to the client software, but it would be easy to hack it in.
Do you think they will care? I suppose this applies to everybody.

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[Red]

5-2
"Peers gain reputation in a similar manner as FreeNets: firstly, be apart of a FN that creates a block; secondly, the peer must be present and sign the new Primary Block at the time of creation—and a point of reputation is gained. Peer reputation is used as a minimum requirement to join more reputable FreeNets. "

OK, you are going to have to acknowledge that the version I started with stressed at the beginning at some human paid to start a TrustNet. Got the privilege of naming the TrustNet. And could invite his (presumably Trusted) friends et. al. to join his new TrustNet.

In that scenario, it doesn't make a lick of sense to say, Hey Bill let me tell you about EnCoin... Fire up a peer, join someone else's shitty TrustNet until you build up enough Trust to join my TrustNet, then maybe I'll Trust you enough to let you in.

Really, when I read it, I figured it was a caveat to keep the rabble out of the Network you had paid money to start and were busy investing money in building.

8-3
"While the payout structure itself is TBD, the biggest, fastest hashing machine will not be rewarded as much as they would hope. It will be based on a set percentage given to the final placement of each peer’s best hash value. For example: you could throw the biggest super computer in the world in a FreeNet, but if the winning hash value only gets 20% of the pot, this supercomputer is subsidizing everyone else in that FreeNet.

So this encourages people to simply use their normal, everyday computer for making coins. There is little incentive to build a massive, 4x GPU machine to mint coins faster. It will not benefit you much, and the costs of the hardware may take years to recoup."

OK, I did read "best hash value" as something figuring into the ranking. But ranking hashes didn't make a lick of sense. I presumed you wanted to do some sort of non-linear distribution (value only gets 20%) based upon each peer's Trust (Reputation/Placement/Rank).

You appear to have been serious about what I called non-sense. So let's discuss it. How could you possibly rank random numbers over time? If I have a supercomputer and I generated one block. You have a busted old 386 and you generate one block. Then the hashes of these blocks have are randomly distributed across the difficulty range. You can rank the blocks based on this randomness and say the 386 wins this time. But the overall distribution is still 50-50 as we repeat this exercise.

The goal here seems to be to keep the supercomputer from gaining a minting advantage. So just say all member of the group participating in the PB get an equal share.  Maybe you mean minting members. I'm not sure sure. But that's not important. If the distribution isn't equal, and it isn't based on RP, what is it based on?

I realize there is a lot to take in, but this did have its own sub-section under the section "Energy Equilibrium", something that might sound like required reading before arguing that the system has major flaws. Someone getting 3mh/s for 200W is going to be subsidizing someone getting 2mh/s for 220W, and in the end this cancels out someone getting 2mh/s for 180W.

I don't know if you meant that as a light tease, but I'm going to take it that way. Then I'm going to work some math to show you are wrong.

Say you are at a difficulty level with 31 leading zeros. That means you have a 50% chance of generating a block in 2^30 hash tries. Sure someone could generate the block on their 1st try or it might take all the way to the 2^31st try. But it averages out to 2^30 Hashes. Note: a block's units are hashes, not hashes/second.

So if m=2^20 then,
1mh/s will take 2^10 seconds (on average) to complete a block. 17 minutes, 0.28 hour.
2mh/s will take half the time, 8.5 minutes, 0.14 hour.
3mh/s will take one third the time, 5.66 minutes, 0.09 hour.

3mh/s for 200W * 0.09 hour = 18.0 Wh/block
2mh/s for 220W * 0.14 hour = 30.8 Wh/block
2mh/s for 180W * 0.14 hour = 25.2 Wh/block

If each of the peers (on average) gets an equal share for doing equal work. Then the most efficient in electrical cost (Wh/block) Wins! Again, electrical efficiency has nothing to do with (h/s).

Anyways, one of the reasons I want to randomize freenets more is so that there can't be a freenet of just 190W people or one supercomputer and a bunch of duds. You can't know who you're up against, so you don't have data to manipulate the system.

This seem to acknowledge you recognize what I'm saying as true. But you are ACTIVELY trying to make the more electrically efficient subsidize the less electrically efficient.

It can't be done.

All your logic presumes that someone who is generating a block every 5.66 minutes will, WILLINGLY do more work than those generating a block every 8.5 minutes. This is a bad presumption. Each peer has access to the historical record. Each knows the exact the results of his fellow peer's productivity. If an efficient peer endeavors only to be average in blocks, he wins in DOLLARS!

There is a whole famous book about why your philosophy is a bad idea. Give it a quick read. It's awesome!

[Red]

Also, in the revised design, I'm planning on having it so that only one user signs anything for a set period of time (I'm thinking 3 hours) with a private key only they know. Which user is determined randomly each time so that there could not be collusion between freenets to try to sign an invalid transaction. If he tries to sign something the freenet doesn't agree on, they immediately notify the rest of the network. If he is disconnected for more than say, 2 minutes, he'll lose some rep as the FN needs to get a new member to be the signer and notify the other networks.

They could change whatever they wanted in the PB. Clients not connected to the network at the time wouldn't know. It's a very unlikely possibility, but if it did happen, there had to be a way to stop it. Having randomized freenets makes it an even more impossible situation. the "signer" could be evil, but all that will accomplish is wasting time to consensus.

I couldn't agree more with your re-definition of "private key". The section that said distribute the group's private key was a crypto mistake. In crypto a private key really means one and only one person. Once you give it to someone else, it is no longer serves its crypto function.

That said, I was under the impression that everything else in the PB was both deterministic and validated by every other group. (In the same way that transaction confirmations are.)

FreeNet Block minting allocation rules are based upon the previous PB so other groups should be able to detect invalid transactions. Since they are signed by a particular malicious peer, he should get the death penalty network wide.

Reputation Block seems to be deterministic. Did the peer vote "present" during the PB. This is presumably signed so it can't be forged.

Miscellaneous Block seems deterministic as well. If there were module change majority votes. I'm assuming the votes would be signed to prevent forgery.

That just means you need a way to prevent one person or even a 51 majority from prematurely ending the PB reconciliation before everyone gets to submit their sets of data to the Network wide union.

This is again what I was referring to as the problem of controlling time.

[Etlase2]

OK, you are going to have to acknowledge that the version I started with stressed at the beginning at some human paid to start a TrustNet. Got the privilege of naming the TrustNet. And could invite his (presumably Trusted) friends et. al. to join his new TrustNet.

I was just pointing out that the individual peer rep is what was required to join a net. Since the nets weren't network-managed, I needed some way to get people to make new ones. Again, it's a proposal, not a white paper.

OK, I did read "best hash value" as something figuring into the ranking. But ranking hashes didn't make a lick of sense. I presumed you wanted to do some sort of non-linear distribution (value only gets 20%) based upon each peer's Trust (Reputation/Placement/Rank).

You appear to have been serious about what I called non-sense. So let's discuss it. How could you possibly rank random numbers over time? If I have a supercomputer and I generated one block. You have a busted old 386 and you generate one block. Then the hashes of these blocks have are randomly distributed across the difficulty range. You can rank the blocks based on this randomness and say the 386 wins this time. But the overall distribution is still 50-50 as we repeat this exercise.

The goal here seems to be to keep the supercomputer from gaining a minting advantage. So just say all member of the group participating in the PB get an equal share.  Maybe you mean minting members. I'm not sure sure. But that's not important. If the distribution isn't equal, and it isn't based on RP, what is it based on?

It isn't over time, it's per motherfricken block. Each net works to make as many blocks as it can, just like they would in a bitcoin pool. But instead of breaking it up into smaller proofs of work, freenets can simply use a fixed header (we're not securing a block chain!) with each member starting with a random nonce. Whenever someone finds a valid target, the block containing the value and payouts is created based on the best hash value for each member in the freenet. If it were a share system, the supercomputer will dominate time and time again. With a payout structure, the maximum value per block is set. You can't get paid more by going faster without also paying more to each member of the freenet.

edit: the header will probably be based on each user's public key so that this can't be cheated. Either way the target is still the same.

This seem to acknowledge you recognize what I'm saying as true. But you are ACTIVELY trying to make the more electrically efficient subsidize the less electrically efficient.

It can't be done.

All your logic presumes that someone who is generating a block every 5.66 minutes will, WILLINGLY do more work than those generating a block every 8.5 minutes. This is a bad presumption. Each peer has access to the historical record. Each knows the exact the results of his fellow peer's productivity. If an efficient peer endeavors only to be average in blocks, he wins in DOLLARS!

If everyone had the exact same mhash/s and one guy is 40W more efficient than average, he makes a whopping $3.45 additional profit over the course of a month, assuming 12c/kwh. WOW! If he spent $200 on a fancy new GPU that he had no reason to buy other than to be more efficient, he will take 57 months to break even (and even if he bought it for gaming, he can't use it while he's mining!). During that time, everyone who was less efficient than he will probably have upgraded their computers so that now he has no efficiency advantage anymore. If you can get every single person in the network to collude on using less electricity in lieu of hashing power, then the value of ENC would gradually lower over time based on how many ENC already exist. If you can't get every single person in the network to collude then users will see that if they run full blast, they make more money (and everyone else less!), thus bringing up the difficulty over time and requiring everybody else to match or get left behind.

That said, I was under the impression that everything else in the PB was both deterministic and validated by every other group.

Either clients are required to have every single transaction or they're not (I prefer not). If they're not, the 51% could take advantage of those by giving themselves money from other accounts without those clients being the wiser, if they are only connected to bad nodes. Yes, it's a stupid attack, but I put it up there because of a discussion in IRC that concluded "lol it relies on trust".

[Red]

Either clients are required to have every single transaction or they're not (I prefer not). If they're not, the 51% could take advantage of those by giving themselves money from other accounts without those clients being the wiser, if they are only connected to bad nodes. Yes, it's a stupid attack, but I put it up there because of a discussion in IRC that concluded "lol it relies on trust".

This is called an "isolation" attack. Yes, it should be prevented if reasonably plausible, but it is in a completely different class from the rest of the discussion. It fits more in with DNS spoofing, or fishing attacks.

If I can surround a "dumb" client completely I can lie to that client sure. But I still shouldn't be able to man-in-the-middle that client by redirecting his transactions to different accounts. At least not while I'm talking to others.

I think IRC is just making life harder for you. What IRC channel is it by the way?

[Red]

Whenever someone finds a valid target, the block containing the value and payouts is created based on the best hash value for each member in the freenet. If it were a share system, the supercomputer will dominate time and time again. With a payout structure, the maximum value per block is set. You can't get paid more by going faster without also paying more to each member of the freenet.

edit: the header will probably be based on each user's public key so that this can't be cheated. Either way the target is still the same.

You are correct, in your edit. It is still the same problem even with different starting conditions.

I guess it doesn't matter what "best hash value" means, since you claim it is equally distributed "per motherfricken block".

You claim the supercomputer would dominate because it did more hashes than the other machines over the same period of time. To rectify this problem, you want the super computer to do only the same amount of work as the others, or give away its excess effort to the others. We both agree that the super computer wouldn't want to do that.

You claim, therefore, there will be no supercomputers.

I claim, if the supercomputer is more efficient in hashes/W, it will simply just do the average hash rate for multiple networks simultaneously. Thus avoiding your penalty. I could run a hundred nodes on 5W plug computers doing all the network stuff. Then have each plug outsource the hashing to one supercomputer in China that works cheap.

You can't detect this. Nor can you prevent it. Nor as it seems, can you see it.

[Etlase2]

And you continually ignore unsunk costs. Did I not bold enough stuff for you? Have you no concept that one instantaneous flash of the network is not how it will remain forever?
You can build your 20 rig 5W mini-machines, but it's gonna cost you 2 grand. That 2 grand is as effectively put into the market as every watt of electricity. And in the years of you paying off those unsunk costs, standard computer hardware will become more efficient than it was, and you will eventually no longer see any return whatsoever as your fixed mhash/s is dwarfed.

If a significant number of peers are colluding to lower the cost-to-produce, the other peers still working benefit as well (and by more as I showed in the 1mh/s vs 2mh/s example). This will encourage even more people to start minting coins at full blast because there is a profit to be had. No higher power halting-solved computer intervention is required. And no lowering the difficulty means that this problem could only occur over a significant time frame or from the beginning of the network. And if it happened from the beginning of the network, competition will make sure that the market value is what it should be (and if it's not, more people will mine!).

I can only believe you are being intentionally dense now and only selectively quoting what suits you. That, or you have absolutely no sense of economics.

[Red]

And you continually ignore unsunk costs.

I deliberately ignore them because they have no bearing on any of my mathematical arguments. I could just have as easily said, talk 20 outdated old PC I got for free, and outsourced the hashing. Or created a botnet and outsourced the hashing.

You're answer is always, "Yeah, but everyone's going to notice. Then they'll all start doing it too! Inflation will start. Everyone will decide inflation is bad, so will will agree to increase the difficulty. So there!"

If a significant number of peers are colluding to lower the cost-to-produce, the other peers still working benefit as well (and by more as I showed in the 1mh/s vs 2mh/s example).

I clearly demonstrated how they are not REQUIRED to "benefit others as well." You did not refute my point.

This will encourage even more people to start minting coins at full blast because there is a profit to be had. No higher power halting-solved computer intervention is required.

Again, you just said, "Of course everyone will take the path that's least profitable to themselves. How could they not want to maximize their momentary gains while sabotaging their long term profitability?"

And no lowering the difficulty means that this problem will could only occur over a significant time frame or from the beginning of the network. And if it happened from the beginning of the network, competition will make sure that the market value is what it should be (and if it's not, more people will mine!).

But what you fail to acknowledge is you've just run all the machines off the network that you designed the network for. Now you have a network of people who understand the benefit of minimizing hashes/watt. All secretly competing to minimize their hashes/watt cost.

That was what I have tried to explain from the beginning. You simply cannot algorithmically force the efficient to subsidize the inefficient. That has to be done at the point of a gun.

I can only believe you are being intentionally dense now and only selectively quoting what suits you. That, or you have absolutely no sense of economics.

You took the word right out of my mouth! If you wouldn't mind, why don't you invite some of your IRC friends here to critique my density!

----

I know you addressed the FreeNet Sybil problem by adding a fee to create FNs. I'm assuming you've already solved the Peer Sybil problem.

I'm sure you already noticed that in the grand scheme of things, it is trivial for one computer to serve as a FN Peer to multiple FreeNets simultaneously. Most of the work is completely redundant. If I'm receiving transactions, validating them, and signing them with one FN key. Then it is no more bother to sign the blocks as a representative of 10 different FNs. The additional broadcasting is really not a barrier with today's bandwidth.

The only thing that can't be done simultaneously is hashing at 100% cpu power for each network. However, I've clearly shown that is not required.

I could take my one already efficient machine (or plug plus an outsourced hashing rig) and create 10 virtual machines. Each would hash at 2mh/s and claim to running at 220W (or whatever the minimum requirement). Then I would be the someone in your, "subsidizing someone getting 2mh/s for 220W" example. But Woot! I would be getting whatever subsidy you are proposing ten times over!

---

What if I did that with my 10 plug computers creating 1,000 virtual peers for $1,000 and then outsourced hashing to one of those big bitcoin rigs looking for a little steady revenue. I'd fake being 1,000 slow peers and take the subsidies you propose from the others greedy supercomputers.

Then if word got out, people would compete with me by faking having the most slow inefficient boxes! How perverse! We'd be 3 guys with 30 plugs, simulating 3000 crappy peers taking subsidies from 3000 slightly above average peers. All while paying off one high-end bitcoin GPU rig to do as little hashing for us as we could get away with.

[Etlase2]

I deliberately ignore them because they have no bearing on any of my mathematical arguments. I could just have as easily said, talk 20 outdated old PC I got for free, and outsourced the hashing. Or created a botnet and outsourced the hashing.

No, you deliberately ignore them because they clash in the face of your argument. Your magical, 100% more efficient hardware is simply free! And nobody else knows about it! And 20 outdated PCs are somehow cheaper to run than 1 modern PC! I guess?!?!

Here's a link: https://en.bitcoin.it/wiki/Mining_hardware_comparison

Notice how the more efficient hardware gets significantly less mhash/$? :GASP: Who'd have thunk it? Oh, maybe me! And that today's 5970 is tomorrow's 5770 and what affect this has!

You're answer is always, "Yeah, but everyone's going to notice. Then they'll all start doing it too! Inflation will start. Everyone will decide inflation is bad, so will will agree to increase the difficulty. So there!"

Difficulty - Known by everybody! For the sake of simplifying, we will say it means "amount of hashes on average it takes to find 1 ENC"!
ENC Sell Price - that would be market price in case this is confusing. Determined by competition (supply) and demand!

Then We Get:

(Difficulty / (MHash/s * 3600)) * (kWattage * kWhCost) = Cost To Produce!

Then We Get:

(ENC Sell Price - Cost To Produce!) / (Cost To Produce!) = RETURN ON INVESTMENT

If this number is positive that means it is profitable to mine! It does not matter if an ENC costs 10kwh or 8kwh or 5kwh or 15kwh to produce! The market will figure it OUT!

Again, you just said, "Of course everyone will take the path that's least profitable to themselves. How could they not want to minimize their immediate gain and sabotage their long term profitability?"

Computational Unpredictability LOL! How would a new user know that everyone else is only running at half mast? They would only see that they are making twice as many coins! You assume the same flaw in logic that you think I have! Why would they not want as many coins as possible when the price is profitable? Because half the network might be secretly pretending to run a less efficient system?

ROFL

But what you fail to acknowledge is you've just run all the machines off the network that you designed the network for. Now you have a network of people who understand the benefit of minimizing hashes/watt. All secretly competing to minimize their hashes/watt cost.

See above!

I could take my one already efficient machine (or plug plus an outsourced hashing rig) and create 10 virtual machines. Each would hash at 2mh/s and claiming to run at 220W (or whatever the minimum requirement). Then I would be the someone in your, "subsidizing someone getting 2mh/s for 220W" example. But Woot! I would be getting whatever subsidy you are proposing ten times over!

LOL @ "claiming" & "minimum watt requirement"! "Hey Bravo, this is inefficient system ZQ-Alpha punching in at 220W. Please provide my subsidy!"

[Red]

Here's a link: https://en.bitcoin.it/wiki/Mining_hardware_comparison

Altera EP4CE115C7   80 Mhash/s 18.18 Mhash/J   $299 academic
6950      0.336062 Mhash/s   1.8 Mhash/J  $250

The Altera does 18.18 Mhash/(watt second) = 65,448,000 Mhash/kwh
The 6950   does  1.8 Mhash/(watt second) = 6,480,000 Mhash/kwh

The Altera is 10 times more energy efficient than the 6950. Both cost less than $300
The Altera is 240 times faster than the 6950.

The Altera doesn't have to produce 240 times as many coins as the 6950 thus burning more total dollars.
It can simply produce 10 times more for equal dollars and loaf.
Or it can an equal number of coins for 1/10 the price and loaf.

The Altera has the choice to decide what is the most profitable way to run the 6950 out of business. It just watches the ENC sell price fall until the 6950 quits. That means as you pointed out that:
ENC price = 6950 cost to product
ENC price = (10x) the Altera's cost to produce.

Now at this point, the Altera doesn't have to be a total dumbshit and mint until the coins fall to ENC/10. Or show off and invite everyone else into his game. He just holds the prices steady making maximum profit, while telling everyone else, he's losing money for the good of the network.

Still don't get it?

The whole point of the system is to reach price equilibrium. This is exactly what would happen if every node was a 6950. ENC would reach the exact same price. Lots of people would mint a little and sell them off. Sometimes they'd make money and the ENC price would fall. Sometimes they lose money and the ENC price falls.

The Altera just makes money every time. As a side effect everyone else makes less, without the ability to know they could be doing better. The Altera guy could just be a better market timer than them. He's certainly not doing anything crazy looking.

If they upgrade and mint faster, everyone will upgrade and what good would that be? Just more sunk costs for everyone and no more profit to offset it. Better to stick with Ryan's original plan.

[Etlase2]

Altera EP4CE115C7   80 Mhash/s 18.18 Mhash/J   $299 academic
6950      0.336062 Mhash/s   1.8 Mhash/J  $250

The Altera does 18.18 Mhash/(watt second) = 65,448,000 Mhash/kwh
The 6950   does  1.8 Mhash/(watt second) = 6,480,000 Mhash/kwh

The Altera is 10 times more energy efficient than the 6950. Both cost less than $300
The Altera is 240 times faster than the 6950.

I'm honestly curious how the 6950's 360MHash/s turns into .336. I mean it's only off by a factor of 1000.
So if we use the real numbers, the Altera is 4.5x slower than the 6950.

I'll even give you a bonus and say the 6950 was specifically purchased for 50/50 gaming and mining. So the mining unsunk cost is $125.
$299 if you're a student, sure I'll give that to you, minus $125 = $174 unsunk cost difference.

Since the Altera is 4.5x slower, it will earn 4.5x less coins, on average. If 15 ENC is average and the average card is a 6950, that means it earns 3.33 ENC per month. Fuck it let's just say the Altera is completely free to run, and an ENC is worth $2. 26 months to break even ruffalo (and in the mean time the difficulty is going up as people gradually upgrade their computers, so really we're looking at more like 30-36 months. And since it will probably miss the minimum hash value on occasion, probably 36-38 months.)

[Etlase2]

Oh did I mention that if the economy goes through a big expansion, the Altera will have 4.5x less coins to try to make a big profit with? A shame, really. (This is called Opportunity Cost - I'd give you a wiki link but I'm sure you can find it.)
Or that in the 3-4 years it takes to break even, the algorithm could change to something else and render it useless? Whether this is a new crypto hash or simply the same hash but with memory/cpu work. The EnCoin design is a shitload more forgiving of changing this. And merchants would be eager to accept any change that keeps the value of their ENC stable.

Or that in the 3-4 years it takes to break even, it might just break. LOL!

[Red]

I'm honestly curious how the 6950's 360MHash/s turns into .336. I mean it's only off by a factor of 1000.
So if we use the real numbers, the Altera is 4.5x slower than the 6950.

I have to admit, I don't even know. Too much cut and paste and bleary eyes. But too many little boxes for me to dig through and find a different example. But it doesn't matter! I don't have to match the 6950 in Mhash/s.

(I don't really remember any of the details for "minimum requirements" to maintain your reputation and assure your spot in the minting pool. But I think it was generate at least one FNBlock a day.)

Say when ENC hits "6950 equilibrium", the 6950 is generating 5 blocks a day and the Altera is generating 1 block a day. Now the (ENC_price - 6950_cost_to_produce) = 0. The 6950's ROI is zero. It has to stop minting or continue at a loss.

This is your intended behavior, nothing more. I'm not making any wild claims.

The Altera on the other hand is still profitable at 1 block a day. It can keep minting. So can all the other Altera equivalents. They are 10x more efficient than the 6950. From this moment on they continue earning a ROI.

If there are enough Altera equivalent peers to hold the price steady, just below the 6950's break even, the 6950 peers are for all intents an purposes dead. They don't have to be 10x more efficient. 2x is probably enough.

[Etlase2]

Say when ENC hits "6950 equilibrium", the 6950 is generating 5 blocks a day and the Altera is generating 1 block a day. Now the (ENC_price - 6950_cost_to_produce) = 0. The 6950's ROI is zero. It has to stop minting or continue at a loss.

teehee, you forget that there need to be 4.5x the alteras as 6950s! Otherwise they can't support the demand. I wonder how many people are going to program circuit boards to make a few extra cents a month?

This is your intended behavior, nothing more. I'm not making any wild claims.

The Altera on the other hand is still profitable at 1 block a day.

I believe you are making the wild claim that a $600 machine is free.

[Red]

teehee, you forget that there need to be 4.5x the alteras as 6950s! Otherwise they can't support the demand. I wonder how many people are going to program circuit boards to make a few extra cents a month?

I was going to make that point but realized I didn't have to. The Altera is supported by every other GPU that is even a little more energy efficient than the 6950. The chart shows lots of possibilities.

And Altera and company don't have to keep driving the ENC market price down at the velocity the 6950's were driving it down at. They just have to hold it down. Its much easier to drown someone if they're already underwater.

And as you obviously know, all that fee money has to go somewhere. Now it is going to the most efficient where it belongs. The irony is, to bring the 6950s back to profitability, you have to increase the difficulty while the market is stable. This increase is only to drive out electrically efficiency and add overhead. Sounds totally sensible.

[Red]

I'll admit the previous post was lame. I was a little defensive when I should have read a little further into your post.

Suppose that 6950 equilibrium comes at our long coveted 1 ENC = $1 = 10 kwh
Did you work through the math?

6950 sells coins at $1 with a cost of $1 for a net of 0.
Altera sells coins at $1 with a cost of $0.10 for a net of 90 cents per coin.

Even if the sell price goes up. And the 6950 begins minting 5 coins for each 1 Altera mints. Until the ENC price reaches $1.23, the Altera still generates more proft on its one coin, than the 6950 generates on its 5.

I wonder how many people are going to program circuit boards to make a few extra cents a month?

More than you might think!

I believe you are making the wild claim that a $600 machine is free.

I'm sure 90 cents on each generated coin will pay back even a $600 machine pretty quick. Much faster than the nickels you keep mentioning.

[BubbleBoy]

Bitcoin does quite well at achieving an average award of 50 btc every 10 minutes; it is little different from an average computer achieving 1 ENC every 50 hours.

Those goals are entirely different. Bitcoin achieves 300 coins per hour axiomatically, and it does not attempt to control who gets it. You are trying to guarantee an average computer gets close to one ENC, yet there is no way a computer algorithm can do that. You can only check for the solutions to a hard puzzle that takes about 50 hours to solve on a PC, 100 hours on a laptop and 10 seconds on a botnet. You will never be able to determine algorithmically that the results were submitted by a botnet.
The payout structure you have devised to counter this phenomenon seems arbitrary and stems from a lack of understanding of the sybil attack. If anything please (re)read the conclusions of JR Duoceur's paper on sybil attacks and try to apply it to your system. It seems you are achieving what he claims is impossible, a distributed system that can discriminate against powerful peers and exclude them without using a central identity issuer.

If you drop the whole egalitarian/community BS what you get is a bitcoin-like system with fixed difficulty, in which inflation is proportional to hashing efficiency. Various schemes have been proposed in this board that attempt to counteract the effects of Moore's law, but the general idea is the same, the most efficient miner wins. The best you can do is adopt a scheme similar to scrypt/*brix that should keep ASICs or FPGA at bay for a few years, but you open the door wide to botnets.

While I agree with you about this specific proposal. I agree with Etlase2 that stable money would be good. I also think using electricity as a benchmark worth further investigation and discussion.

Stable prices are a worthy goal. Pegging currency to any one commodity is not a good idea. The greens are in kill-mode against nuclear energy. Germany is shutting down it's reactors. Renewables are too expensive even in this era of cheap oil. Assuming a major energy crisis hits the planet, the effect is high prices of energy, inflation and recession. The Enron-Coin algorithm counteracts by halting monetary expansion, hopelessly pro-cyclical. In such a situation inflation is necessary to enable higher prices to relocate the lost wealth.

If you are declaring that 1ENC=10KWh you are giving an unfair advantage to holders of ENCs, you treat them as if the energy crisis did not happen and they can buy the same amount of goods and services as before. Well, the crisis did happen, and this can only mean the rest of the populace needs to further constrain their consumption to fulfil the needs of the ENC aristocracy.

I also have a visceral dislike for proof of work currency (a.k.a waste of useful resources), but it's very hard to solve that problem with a distributed currency.

[Red]

Awesome post BubbleBoy! I'm going to jumble the order of some of your quotes so I can clearly delineate where I am in agreement and disagreement with the EnCoin concept.

Stable prices are a worthy goal. Pegging currency to any one commodity is not a good idea.

I totally agree with you. Which is odd, because it clearly I'm saying something that seems very close to the opposite!

The part I'm agreeing with is 1 *coin should *not* be pegged at 10 KWH as EnCoin suggests. Specifically, by requiring each coin to represent burning an average of 10 KWH. I find that impossible for the same reasons you do. What I'm saying is, electricity is the only commodity I've noticed that has even the potential to become a tool for stabilizing *coin prices.

Electricity has one unique characteristic. As Etlase2 points out, we can require someone to purchase at least some energy prior to creating a new *coin. This means the coiner has "skin in the game" prior to creating/selling coins. I don't see any other basket of goods that has these characteristics. I can't force someone to burn wheat in the process of manufacturing a *coin.

The question then shifts to how much electricity do we need to require at this moment? While it is impossible to determine exactly how much any particular person must purchase, fortunately, it is possilble to dictate that they purchase more relatively speaking or less than was required in the previous period. (Changing difficulty)

The Enron-Coin algorithm counteracts by halting monetary expansion, hopelessly pro-cyclical. In such a situation inflation is necessary to enable higher prices to relocate the lost wealth.

If you are declaring that 1ENC=10KWh you are giving an unfair advantage to holders of ENCs, you treat them as if the energy crisis did not happen...

I totally agree with these statements. Both would be bad and should be avoided.

What I'm proposing is the (coin/kwh) requirement is constantly changing algorithmically based upon market conditions and the demonstrated need for new coins. The price of electicity serves as a limit constraining two non-linear functions. The (coin/$) exchange rate and the (kwh/$) exchange rate.

Again, even that sounds impossible. But, here is the edge.

I'm not suggesting the algorithm dictates when coins must be made. That remains a human decision. Human's make coins when Arbitrage between (coin/$) and (kwh/$) makes it profitable to do so.

In a stable economy with a *coin price at a stable equilibrium, there is ZERO need to create new coins. Therefore, the proposed algorithm must give zero incentive to creating new coins. At this point 1 Coin = X kwh and there is no arbitrage profit. An algorithm CAN monitor the lack of coin creation.

If the economy is increasing (more $ of goods to trade), then the (coin/$) relationship will vary from the (kwh/$) relationship. This creates arbitrage incentive to create new coins. An algorithm CAN monitor demonstrated coin creation.

If the economy is decreasing (less $ of goods to trade), then the (coin/$) relationship will vary from the (kwh/$) relationship. This creates an incentive destroy coins and/or discourage selling coins. I propose a transaction TAX burning coins for this. Again, an algorithm CAN monitor coin destruction.

I proposed the beginnings of an algorithm in a prior thread. But the gist goes.

If people are minting excess coins, then make it more expensive to mint coins. (increasing economy)
If people are being taxed, then make it cheaper to mint coins. (decreasing economy)
If people want to mint just enough coins to rebate their tax, let them. (stable economy)

the most efficient miner wins. The best you can do is adopt a scheme similar to scrypt/*birx that should keep ASICs or FPGA at bay for a few years, but you open the door wide to botnets.

I totally agree with you. I'm suggesting competition between arbitragers to monitor the market and keep prices stable. This is the opposite of "Everyone can run minting in the background without thinking about it."

I also have a visceral dislike for proof of work currency (a.k.a waste of useful resources), but it's very hard to solve that problem with a distributed currency.

Totally agreed. In this model I want to minimize the number of people who have to burn needless electricity. That is just unnecessary added overhead to the *coin economy. Only arbitragers would need to solve proof-of-work problems. And then, only when they see it as profitable to do so.

--- Note ---

If electricity prices vary dramatically, or even if the economy varies dramatically (Walmart accepts coins), then coin/kwh relationship we move from the previous equilibrium.

The goal for the system, is to assure that it always moves to a new stable equilibrium rather than tending to zero or infinity.

[Etlase2]

Those goals are entirely different. Bitcoin achieves 300 coins per hour axiomatically, and it does not attempts to control who gets it. You are trying to guarantee an average computer gets close to one ENC, yet there is no way a computer algorithm can do that. You can only check for the solutions to a hard puzzle that takes about 50 hours to solve on a PC, 100 hours on a laptop and 10 seconds on a botnet. You will never be able to determine algorithmically that the results were submitted by a botnet.

Why would I care if a botnet is trying to earn coins? It doesn't undermine the system. And with the payout structure, it will be a much more complicated endeavor (nigh impossible with randomly assigned peers as I am now describing) trying to maximize the payout. With Bitcoin, all an entire botnet needs to do is send data to one peer and that peer will earn coins as though he were the entire botnet. Now instead the controller must often force his botnet to compete against itself and try to be average to avoid penalties of being too fast or too slow. If we assume these botnets are CPU mining (as the bitcoin community does), they need to be split into 40-50 computer computer sub-botnets, and each sub-net must actually participate in the network, unlike bitcoin. This means over 20 times the bandwidth required for a 1k computer botnet. Admittedly, this wouldn't mean much for a long time. In the mean time, anti-malware or firewall software should have no problem detecting this activity.

The payout structure you have devised to counter this phenomenon seems arbitrary and stems from a lack of understanding of the sybil attack. If anything please (re)read the conclusions JR Duoceur's paper on sybil attacks and try to apply it to your system. It seems you are achieving what he claims is impossible, a distributed system that can discriminate against powerful peers and exclude them without using a central identity issuer.

The payout structure has nothing to do with the sybil attack scenario I described. I wanted to make sure that for an agency trying to subvert the reputation system that it would cost dearly and accomplish little.

If you drop the whole egalitarian/community BS what you get is a bitcoin-like system with fixed difficulty, in which inflation is proportional to hashing efficiency. Various schemes have been proposed in this board that attempt to counteract the effects of Moore's law, but the general idea is the same, the most efficient miner wins. The best you can do is adopt a scheme similar to scrypt/*birx that should keep ASICs or FPGA at bay for a few years, but you open the door wide to botnets.

The difficulty isn't fixed, and inflation is created by demand. As of yet there are no supermachines that are less costly, more efficient, and capable of keeping up with everyday GPUs in both speed AND versatility. Until this is the case, GPUs will remain king of setting the difficulty. The best I can do is not adopt a scheme similar to *brix as it is aiming to be a CPU miner; rather, the two could be simply combined, or any other various algorithms could be used over straight SHA or whatever the hash is at the time.

Stable prices are a worthy goal. Pegging currency to any one commodity is not a good idea. The greens are in kill-mode against nuclear energy. Germany is shutting down it's reactors. Renewables are too expensive even in this era of cheap oil. Assuming a major energy crisis hits the planet, the effect is high prices of energy, inflation and recession. The Enron-Coin algorithm counteracts by halting monetary expansion, hopelessly pro-cyclical. In such a situation inflation is necessary to enable higher prices to relocate the lost wealth.

Darn, EnCoin can't account for a major energy crisis. I knew there was something I was missing in trying to solve every single existing or future problem of the world.

If you are declaring that 1ENC=10KWh you are giving an unfair advantage to holders of ENCs, you treat them as if the energy crisis did not happen and they can buy the same amount of goods and services as before. Well, the crisis did happen, and this can only mean the rest of the populace needs to further constrain their consumption to fulfil the needs of the ENC aristocracy.

So it takes a world crisis for an early adopter scenario to emerge with ENC, but with BTC it takes 1 person and a pre-mine. Hmm.

[Etlase2]

And if you are curious about Red's proposal, this is the gist of it:

Because for every 1,025 dollars Bill receives for selling his ENC to the exchange, Bill sends $1,024 to the electric company and keeps $1. Charlie sends $1 to the electric company and keeps $1,024.

Which is as it should be.

The issue he keeps trying to bring up with Encoin is precisely the same. Except that with his system, you have a technological elite with a monopoly on the money supply (sure Bill will keep going at a .009% ROI for 720 computer-hours a month of work) who can simply just hoard and drive up the prices at will without ever a whit of a chance for anyone else to make coins because he can simply make them when the difficulty falls back in his profitability range but no one else's. Drive up the price/let difficulty fall, sell, mine. Hey look we've got a more convoluted version of Bitcoin. And no incentive for anyone to secure the network but arbitragers and those who they've got by the balls.