[ANNOUNCE] The Proposal for EnCoin

[Red]

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.

This is a nasty sounding, but pretty fair summary of what I am suggesting.

Arbitragers will compete, not on how fast they can hash, but on how cheaply they can hash. The arbitrager with the lowest overhead wins. The mathematics of the minting algorithms prevent even the last rogue minter from driving the system away from stability.

If the latter holds. The former is always perfectly sensible. Otherwise, you are arguing to allow others to do exactly the same job, but at a higher cost. As all electrical costs are directly born by clients transacting in the *coins, minimizing this overhead expense benefits everyone.

Anyone is allowed to mint. However, the vast majority of people using this system won't mint, and won't want to mint. The arbitrage competition requires too much *human* mental effort, and it requires gambling with ones personal dollars.

However, as with bitcoin, anyone can run a client which keep tabs on the honesty of the rest of the network. These clients require trivial hardware to run and very little electricity. Absent all the needless hashing, monitoring honesty is a trivial problem.

And no incentive for anyone to secure the network but arbitragers and those who they've got by the balls.

This however is not a correct summary for any reasonable definition of "secure the network". I claim that security will be provided (as it is with bitcoin) by cryptography. This prevents all theft, fraud, forgery and transaction related mischief. Denial of service (preventing valid transactions from being acknowledged) and history substitution (chain swapping) is not subject to the minters at all.

Network continuity, and denial of service prevention become the responsibility of those non-anonymous parties that profit in the actual *coin marketplace. However, it is never compromised by 51% attacks. Denial of service/history modification requires 100% consensus among well known non-anonymous parties that can be held legally responsible for their actions.

So, I claim if even 99% of non-anonymous parties attempt to block valid transactions or change history, the last 1% has 100% of the evidence necessary to file charges against (or publicly disgrace) the others. Even if 100% of non-anonymous parties are compromised, every anonymous monitor holds the same evidence.

That is what I call "security".

[Suggester]

Etlase, the EnCoin concept seems very promising! It's what I've been hoping for since I started my infamous thread almost two years ago. You're welcome to read the initial post and kick some skeptic butts if you feel like as I revived it again today after the hacking of Bitcoin7. I believe the instability of prices is making users vulnerable to exchangers as they need to keep their "bitcoiny" wealth in fiat form to avoid price fluctuations, which defies the whole point as puts us back to square one.

I don't address any security issues or drastic changes like you do here though. The whole premise is about the economic necessity and the practical plan to tie bitcoin's price to electricity.

It'd be very sad if you had to go through publicity and advertising from scratch for EnCoin though. I was hoping the Bitcoin's developers would listen to the sound of reason and introduce these changes to the original client instead. If no steps are taken to ensure the coin's price stability it will never go mainstream. It'll be regarded as a very risky investment almost like gambling instead of being a friendly medium of exchange which everybody can use to escape the control of big corporations and big brothers.

[Etlase2]

Etlase, the EnCoin concept seems very promising! It's what I've been hoping for since I started my infamous thread almost two years ago. You're welcome to read the initial post and kick some skeptic butts if you feel like as I revived it again today after the hacking of Bitcoin7. I believe the instability of prices is making users vulnerable to exchangers as they need to keep their "bitcoiny" wealth in fiat form to avoid price fluctuations, which defies the whole point as puts us back to square one.

I don't address any security issues or drastic changes like you do here though. The whole premise is about the economic necessity and the practical plan to tie bitcoin's price to electricity.

It'd be very sad if you had to go through publicity and advertising from scratch for EnCoin though. I was hoping the Bitcoin's developers would listen to the sound of reason and introduce these changes to the original client instead. If no steps are taken to ensure the coin's price stability it will never go mainstream. It'll be regarded as a very risky investment almost like gambling instead of being a friendly medium of exchange which everybody can use to escape the control of big corporations and big brothers.

I was completely unaware of your thread, thanks for pointing it out. I don't believe the Bitcoin developers will be listening to the sound of reason any time soon. And the vocal majority around here is very pro-pyramid, so that could very well be used as the reasoning for not changing it.

I haven't read the whole thread, but it appears you want to stabilize the price of a bitcoin with the dollar, based on the estimated number of CPUs mining. This has 3 major problems, imo: 1) it doesn't protect against dollar inflation (which isn't terrible, but if the fed prints more dollars so does bitcoin), 2) estimating the number of CPUs is difficult if not impossible with the bitcoin proof-of-work design, 3) the security/continuity/dependability of the network still relies on massive amounts of hashing power, and always will. Bitcoin also has terrible scalability issues.

Once enough coins are produced for ฿1 equaling $1, miners would generate just enough to cover the economy's expansion because any excess will come to them at a loss.

This opens up the network to attack, unfortunately. edit: Or would your "cooling down" settle up transactions too? Then that isn't bad. I'll have to read some more.

Although it's not in the proposal yet, I did mention somewhere in this thread I came up with a very reasonable solution to not require hashing power at all: let merchants put their money on the line to secure the network, and in return, refund most or all of their mandatory transaction fees. So if the economy is completely stable, no hashing power is necessary.

I'll peruse the rest of the thread when I have time as there might be some good discussion in there somewhere (I hope). I'm probably going to work on one final, major revision to the proposal, then that will be it from me for the rest of the year at least. If enough interest has been generated, I might be persuaded to even hire some coders if necessary. I simply don't have the skills to make this happen and I have no problem admitting that. And I don't have the time to invest in acquiring the skills for a non-profit venture of this scale. I love the concept of bitcoin, it's such a shame its vision is based on greed.

[Red]

Woot! One more!

That makes at least 5 people who have shown up and expressed support for stable money. I think if we get two or three more we can take a shot at occupying wall street!

But seriously, Suggester. Thanks for joining the discussion!

[Etlase2]

That is what I call "security".

That is what I call "trusted central authority." That's great if that's what you want, but it's not p2p. Make your own proposal.

"HEY GUISE I got this idea where a small group of people make, control, and distribute the money supply! And if someone disagrees, they can post a message on a message board!"

[Red]

That is what I call "trusted central authority." That's great if that's what you want, but it's not p2p. Make your own proposal.

Actually I wasn't going to bother since there is so little interest here. But I checked the survey results on Suggester's poll and 26% of the people support his proposal and 10% partially support him. That is 36% interest in stable money. I guess I will start a thread.

Funny? Why do you think all these people are not interested in you?

"HEY GUISE I got this idea where a small group of people make, control, and distribute the money supply! And if someone disagrees, they can post a message on a message board!"

Yeah, it is going to come as a real shock to bitcoiners that a small group of people, make control and distribute their money supply! Most of the posts on this forum are from people who are in that group or want to be in that group.

P2P means peer to peer. Anyone in my system can be a peer. Anyone can be a trusted peer. They just can't be an "anonymous trusted peer". As you pointed out, that concept is just stupid. Anyone can however mint all the coins they want. Even anonymously! But only the ones who are both smart and efficient will be able to do so profitably.

Which is as it should be. Because only a complete moron thinks you should penalize the smart and efficient, to benefit the stupid and inefficient. That is the closest thing this site has to a core principle.

[Etlase2]

Because only a complete moron thinks you should penalize the smart and efficient, to benefit the stupid and inefficient. That is the closest thing this site has to a core principle.

How does "smart" = "efficient"
and "stupid" = "inefficient"

in the case of achieving a stable currency based around a commodity? This is the exact same thought process that suggests "smart" = "early" in bitcoin.

A commodity is neither smart nor stupid, efficient nor inefficient. Megahashes are not the commodity, electricity is. I am not looking to reward who can get the most megahashes in a watt of electricity. I am not proposing the exchange and trade of megahashes. Megahashes are not a product. The goal is not how much profit can be made, the goal is a stable medium of exchange. When the goal becomes who can make the most money, the medium of exchange is lost. Instead you have an ever-continuing competition and the absolute clusterfuck waste of resources that accompanies it and absolutely no one benefits besides whoever comes out on top--for the time being. Is it so wrong that I want miners, sellers, traders, hoarders, savers, spenders, and aunt jemima all to benefit from my system? Not just the privileged, "smart" few?

[bulanula]

This thread is too much talk and no action.

I think you need to actually start making this a reality. Is this going to be CPU or GPU based ?

Thanks !

[Red]

The goal is not how much profit can be made, the goal is a stable medium of exchange.

Agreed. That was what I proposed.

When the goal becomes who can make the most money, the medium of exchange is lost.

Agreed. That was why I make it clear most people wouldn't be minting or benefiting from minting. It is a pure, stable, medium of exchange.

Instead you have an ever-continuing competition and the absolute clusterfuck waste of resources that accompanies it and absolutely no one benefits besides whoever comes out on top--for the time being.

Agreed. That's why we should involve as few people as possible in that cluster fuck. That's why I said only "Smart" gamblers will take part in arbitrage. "Dumb" gamblers are welcome to try, however their dollar losses need not be born by aunt J. Dumb gamblers should pay their own bills.

Clients don't even have to know the arbitrage process is going on. Hell it happens everyday with dollars/gold/etc and I pay zero attention to who is winning and who is losing their arbitrage positions.

Is it so wrong that I want miners, sellers, traders, hoarders, savers, spenders, and aunt jemima all to benefit from my system? Not just the privileged, "smart" few?

Stable money is a benefit to everyone. Making the currency stable should cost everyone as little as possible. Every penny that goes to the electric company is overhead that comes out of sellers, traders, hoarders, savers, spenders, and aunt J's pockets. None of it, in your model is intended to come out of the minter's pocket. Instead, everyone else's overhead, becomes the minter's ROI.

This is true in my model as well. But my model works to minimize the number of dollars that goes to the electric company. Therefore it minimizes the overhead charged to sellers, traders, hoarders, savers, spenders, and aunt J's.

[Etlase2]

This thread is too much talk and no action.

If you have a link to where I can find coders who can code extremely secure and efficient network protocols for cheap, let me know.

I think you need to actually start making this a reality. Is this going to be CPU or GPU based ?

It is going to be 100% GPU based to start, using the exact same algorithm as bitcoin so that it can make use of merged-mining and award both encoins and bitcoins.
At some point in the future it will break away from this. Whether it's to CPU or CPU+GPU or some ubiquitous other card or device I don't know.

This is of course assuming it goes anywhere beyond proposal stage.

Agreed. That's why we should involve as few people as possible in that cluster fuck. That's why I said only "Smart" gamblers will take part in arbitrage. "Dumb" gamblers are welcome to try, however their dollar losses need not be born by aunt J. Dumb gamblers should pay their own bills.

The only serious argument you've brought against my idea is the increased efficiency of expensive, slow, application-specific machines potentially reaping an outsize profit. And that this will somehow exclude everyone else from being part of the game. Assuming this is the case, how is it any different from your system? Because your system relies on a timer?

Making the currency stable should cost everyone as little as possible. Every penny that goes to the electric company is overhead that comes out of sellers, traders, hoarders, savers, spenders, and aunt J's pockets. None of it, in your model is intended to come out of the minter's pocket. Instead, everyone else's overhead, becomes the minter's ROI.

Pennies that go to the electric company do not come out of anyone's pockets. Sellers, savers, etc. buy a value of electricity plus a ROI for the hours of computer work involved. Getting the cost to produce back is not a ROI--nor is the ROI overhead a burden on everyone else, the coin is the electric value+ROI. You can sell the coin for the same price you bought it for. You aren't losing money because someone made 50 cents on creating the coin. Gold you purchase doesn't lose value because of the cost to mine it, that is inherent in the price of gold. You are free to go and mine your own gold if you find the price to be too high.

You suggest everyone competes for the same batch of coins, all wasting resources and only one benefiting. Where are the savings, exactly? That an eventual technological elite monopoly will occur to force out competition? And no one will ever contest it? And somehow this is inflation-proof? Instead of money going to the electric company, money goes to the elite, but yet everyone else benefits because less electricity was wasted? What is to keep them honest about keeping the price stable instead of just going for the more immediate profit (or the longterm profit in hoarding)? Goodwill towards mankind?

How about you try to put some actual numbers and equations together so we can see how this will work out. Rather than difficulty+1 and transaction fees/2. I'm interested in the concept, and willing to steal some of it, but at this point it is too far from an actual system for me to fully comprehend the implications. I don't care about security or dependability or whatever noun you want to give the network. Just the monetary policy. You're completely willing to assume your system is bullet proof while shooting holes in mine and ignoring the costs involved, but you haven't given me anywhere near enough ammo to try yours. Put your money where your mouth is.

[Red]

Really, we agree on about 90% of our principles. The 10% we disagree on is worth arguing over though.

The only serious argument you've brought against my idea is the increased efficiency of expensive, slow, application-specific machines potentially reaping an outsize profit. And that this will somehow exclude everyone else from being part of the game. Assuming this is the case, how is it any different from your system?

I'm not saying I have an "attack" on your system. I'm saying that the electrically efficient hashers driving out the electrically inefficient is a natural consequence of your design. It is a natural consequence of my design too. Electrical efficiency is not something either of us can detect, so it is not something we have any power to prevent.

It is analogous to bitcoin, except there the temporally efficient (faster) hashers drove out the inefficient. There was no way to prevent that, so satoshi made it a feature.

Because your system relies on a timer?

I don't know what this means, so I don't know how to respond.

Pennies that go to the electric company do not come out of anyone's pockets. Sellers, savers, etc. buy a value of electricity plus a ROI for the hours of computer work involved. Getting the cost to produce back is not a ROI--nor is the ROI overhead a burden on everyone else, the coin is the electric value+ROI. You can sell the coin for the same price you bought it for. You aren't losing money because someone made 50 cents on creating the coin.

Gold you purchase doesn't lose value because of the cost to mine it, that is inherent in the price of gold. You are free to go and mine your own gold if you find the price to be too high.

My use of ROI was probably too smug. But let me be clear this is a closed system. The number of dollars going out of the system, cannot be greater than the number of dollars going into the system. It doesn't matter what happens in between.

Let's say buyers have $10,000 to spend buying ENC.

Now lets say there are 1,000 peers who burn 200W*24hours*30days. That's 144,000 kwh or about $14,400 to the electic company. Or about $14/peer say we want to give each peer $5 on average for their trouble. 35% ROI. Now we have $19,400/month in costs to run the system. That means minting somewhere near 20,000 ENC. So the price will be $1 = 1 ENC.

So the peers take these coins to the exchange and get... $10,000. Because that is all the dollars there are.

You can say 500 peers sold 20 ENC each for cost+ROI=$19.40 (after transaction fees), and the other 500 have to wait to pay their electric bills. Or 1000 peers sold 10 ENC each for $9.70 and nobody can pay their $14.40 electric bills. That doesn't change the fact that the electric company is still going to want their money, and they can't take it in ENC.

(You have the same potential problem with gold. If I spend $1,000,000 in electricity mining gold. And buyers want to buy $500,000 worth of gold. Then the electric company is still going to be just as pissed.)

The bigger problem is, that out of $10,000 exchanged for ENC, there are zero dollars left for merchants to exchange for, once purchasers have spent their 10,000 ENC. All the liquid dollars have gone to the electric company.

----

I'm not trying to say anything really earth shaking or dramatic.

I'm just saying that 1,000 non-minting peers who burn an extra 5W*24hours*30days (running this app in the background like bittorrent while doing other things). Comes to about 36 cents each. This can go without reimbursement.

Say 10 committed competing arbitragers running 500W only when profitable, say 6hours*15days when things are stable. That is 450kwh or about $4.50 in overhead (45 cents each)

So out of $10,000 exchanged for ENC, the arbitragers take $4.50 to cover their overhead. Then they take $50 each as 10X ROI. But this still leaves $9,495.50 not permanently extracted from the system.

----

Yes I realize this example is contrived, and maybe you can poke fun at different non-sensical bits. But the main point is, every dollar that goes to minters, comes from the pocket of someone buying ENC on an exchange. Those dollars will never be available to swap on the exchange again.

I know there is a little multiway exchange diagram somewhere that shows this problem.

Alice has an Apple but wants a Banana
Bob has a Banana but wants a Caramel
Carl has a Caramel but wants a Dollar
Don has a Dollar but wants an Apple

So Don give he dollar to the electric company in exchange for an ENC.
Carl says, "Hey WTF! I needed that dollar! And eats his caramel.
Bob says, "Hey I wanted that caramel, and punches Carl.
Who slips on the loose banana and falls into Alice,
distracting her just long enough for Don to grab her Apple and run like hell!

---

So in summary

$14,400 fixed cost, bad
$364.50 fixed cost, better
$4.50 fixed out of pocket, best

$5,000 @ $5 each profit, expensive and not so motivating.
$500 @ $50 each profit, cheeper and more motivating.

---

Yes, somewhere during that post I lost my mind. I'll respond more coherently to the rest of your post tomorrow.

And Yes, I'll put my concepts up and let you poke holes in them. I'm pretty sure there are a few unexpected consequences I haven't noticed. I am a little disappointed no body else pinged me to do so from the other thread. Maybe we are alone.
 

[Etlase2]

Because your system relies on a timer?

I don't know what this means, so I don't know how to respond.

You said coins would be competed for every 10 minutes.

My use of ROI was probably too smug. But let me be clear this is a closed system. The number of dollars going out of the system, cannot be greater than the number of dollars going into the system. It doesn't matter what happens in between.

While I realize the overall sense of the proposal is very idealistic, there is nothing wrong with this. If ENC becomes a stable medium of exchange, dollars do not need to leave the system in greater number than the value those dollars produced. You are selling someone a token of value that remains relatively constant. This 1 token can be used over and over again. Yes I realize tx fees eat into that, but since my enlightening with merchants, I have a feeling very few tx fees will actually occur (I also plan on having miners get free transfers out). So $->ENC should cost little to nothing, and ENC->merchant should cost little to nothing.

My vision now is that only people who do nothing for the network actually pay any fees. It will be harder to account for a contracting economy, but anyone who bought high will know that the value was well above what the market is trying to achieve.

Now lets say there are 1,000 peers who burn 200W*24hours*30days. That's 144,000 kwh or about $14,400 to the electic company. Or about $14/peer say we want to give each peer $5 on average for their trouble. 35% ROI. Now we have $19,400/month in costs to run the system. That means minting somewhere near 20,000 ENC. So the price will be $1 = 1 ENC.

So the peers take these coins to the exchange and get... $10,000. Because that is all the dollars there are.

There's no reason to mint if the demand is not there. Unless you want to save the 30 or 50 cents or whatever to buy your loaf of bread. But it still cost you 50 hours of an unusable computer.

The bigger problem is, that out of $10,000 exchanged for ENC, there are zero dollars left for merchants to exchange for, once purchasers have spent their 10,000 ENC. All the liquid dollars have gone to the electric company.

If the currency is widely adopted, the merchants don't need to exchange those ENC for dollars. And there will always be people who want ENC more than $, just as there will be people who want $ more than ENC. This happens every single day in huge quantities around the world in currency markets. People who mint coins are not going to be the only ones selling.

So out of $10,000 exchanged for ENC, the arbitragers take $4.50 to cover their overhead. Then they take $50 each as 10X ROI. But this still leaves $9,495.50 not permanently extracted from the system.

I don't know where you come up with these genius arbitragers, but if you leave the door open for people to make a profit on making currency, competition is going to increase and that profit will eventually go to nothing. Everybody loses as the value of ENC goes down, just like an early adopter sell-off.

So in summary

$14,400 fixed cost, bad
$364.50 fixed cost, better
$4.50 fixed out of pocket, best

$5,000 @ $5 each profit, expensive and not so motivating.
$500 @ $50 each profit, cheeper and more motivating.

Yes, $50 each profit is cheaper and more motivating, meaning more people will do it and eventually the profit will be cents again. Everybody but the "arbitrager" loses.

[Red]

I'm going to respond in detail to your questions but I have limited time today. It is the first Friday of the month and I go to my local 2600 meeting. I just mention this so that you know if I disappear, I'll be back tomorrow.

Second I want to start of with a little preamble to say, I'm going to call some things "my ideas" but only to distinguish the concept from previous things we've talked about. However, I don't personally consider any of these things "my" ideas. You claimed, "it was possible" to do these things, I just presumed your were correct. My goal was/is to understand how you are correct.

So in pursuing my personal understanding of your correctness, I obviously disregarded anything you said that I already knew to be a false path. I just presumed it was miscommunication on your part or misunderstanding on my part. I then asked questions and tossed the concepts around in my head until I could figure out what your path really was. I hate it when somebody claims to know something is provably true, when I can't prove it to be true. I'd long given up on proving this was possible. I never proved it was impossible. It seemed possible. But I never noticed a plausible path to proving it was possible. As such, if we manage to prove stable money as being possible, I claim that it is just the natural termination to the path you started down. Hence, "your" idea.

[Red]

While I realize the overall sense of the proposal is very idealistic, there is nothing wrong with this....
This 1 token can be used over and over again...
My vision now is...

I realize now, that your goal is a variant of satoshi's. Create a coin that can be used in the absence of any exchanges. EXCEPT unlike BTC, you want ENC to be stable in value. Yes, this should have been obvious to me from the beginning. Let me explain why it was not.

Your initial premise was:
1) If coins creation could be made dependent on the consumption of a fixed amount of electricity, THEN (logical implication) coins would have a stable value absent any exchanges.

Yes, I recognized from the beginning that this statement is logically true. That implication does indeed hold. However, I recognized immediately that the antecedent "could be made dependent" was actually, False. While that does not disprove the consequent it doesn't help prove it either.

That was when I asked if you meant ENC = $ = KWH. Whatever your answer was, I interpreted it to be "close enough!"

So I substituted the original implication with:
2) If coins creation could be made dependent on the price of electricity, THEN (logical implication) coins could have a stable value. However, that *will require* an active ENC to $ exchange.


My substitution of premise (2) for (1) is the root of almost every argument we've had. In reality both assertions (1) and (2) are logically true. And in both, the truth of their consequent comes down to the truth of the statement "could be made dependent".

So the real question comes down to:
What made me "recognize immediately" that "could be made dependent" in (1) was False?

Well, technically, it is not false. If you made peer participation dependent on purchasing a specially made, tamper proof, efficiency matched, processing box that was cryptographically signed by a trusted supplier. Then you could assure that 1 ENC required 10 kwh. I dismissed solution out of hand, because it conflicted in philosophy with everything you wrote. But absent that, there is no way to remotely detect a processor's electrical consumption rate.


Everything in bitcoin is based around remotely monitoring (MHash/s). Hashes are monitored by knowing the difficulty level (2^(D-1)). Seconds are monitored by averaging block creation intervals. This gives you an accurate ratio, that you can use to recalculate difficult based upon a target interval of 10 min.

Note however, that monitoring the block interval accurately requires you to prevent parties from lying about block creation times. That is why bitcoin is winner take all. It prevents even collaborative lying. With block chains, the shortest intervals (most blocks) trump the longer intervals (fewer blocks). All of that is really about monitoring time.


Combined electrical efficiency (MHash/ws) cannot be monitored. You still understand Hashes. You can divide the number of blocks created (non-competitively, in a given interval), by the interval time. That give you a slightly sloppier measurement for seconds. But even given these, you have no way to monitor watt consumption (hence your 200W constant).

Side note: You proposed that block creation could cross PB intervals. That means you lose the ability to monitor seconds at all.

But even if you accept the above measurement of (MHash/ws) as being useful, changing difficulty (Hashes) does nothing to affect electrical efficiency (200W constant). You can only effect seconds. This leads to my example of the more electrically efficient driving out the less electrically efficient.

So, I presumed the (1) premise could not be yours, because the only solution to its antecedent was one you would completely oppose.

That is why I began thinking about (2) as the premise you were having trouble conveying to me. Really, it was nothing personal. I was just trying to figure out how you solved (what I called) the more important problems, that come later.

[bulanula]

This is of course assuming it goes anywhere beyond proposal stage.

At this rate, this is going nowhere soon. Please use CPU only algorithm like scrypt etc.

[Etlase2]

So in pursuing my personal understanding of your correctness, I obviously disregarded anything you said that I already knew to be a false path.

No, what you did is misinterpret what I said and continually beat the shit out of a concept I did not propose. Even in the face of my correcting you.

•   To maintain a relatively stable price point where 1 ENC equals approximately 10 kWh of electricity.

I later clarified in the first thread that "price" meant "cost to produce."

One ENC will not ever truly be at par with 10 kWh of electricity. It is merely a gauge in designing the difficulty of the algorithms on which the EnCoin network will run. The algorithms can only determine computational complexity, not the price of electricity or efficiency of the computers running the computations.

1 ENC = 10kWh based on 200Wh per person

Is there somewhere in that equation that says 1 ENC != 5kwh based on 100Wh per person? It was an assumption that need not be true for the system to function exactly the same except for the market price.

In revision 3, I more specifically pointed this out:

To approach the value of 1 ENC equaling 10kWh of electricity, the Network makes a very big assumption that the average computer is using 200W of electricity dedicated to the process of creating coins. If the average computer is instead using 100W or 300W, this by itself poses no problem—the sell price and value of 1 ENC will simply reflect that amount of work instead (5kWh or 15kWh respectively). The 200W figure was chosen because that is a ballpark estimate that is quite reasonable based on modern computers of today.

Now, the real problem:

If [in the future] the average user would be using less than 200W, then a problem arises. If, for example, 1 million coins were created at a cost of 10kWh each then another million coins were created at a cost of 5kWh each, the combined value of the coins would be 2 million @ 7.5 kWh. This means that coins saved go down in value (NB: compared to themselves; fiat inflation and increasing electricity prices may easily counteract this). Based on current and past indicators, the likelihood of this happening is low but not impossible with future technology.

In this thread especially I pointed out that someone with their big bad brand new GPU is going to be making more coins than average; possibly much more. As people gradually upgrade their hardware, this will level out again and the difficulty is increased to match.

You can't get the minting base to agree to run at half power (it will be obvious to anyone with a comparable piece of hardware--they will profit much more than the deceptors, and difficulty will rise). You can't have super secret hardware that nobody knows about. And even if nobody knows about it, it has a negligible effect on the economy.

You can't pretend unsunk costs don't exist for practicably useless hardware to prove your point. Part of the benefit of the GPU is that you already have one! And people are always upgrading them for reasons much more important than making coins. Fixed hardware is just not going to keep up unless it somehow drops like a rock in cost.

BUT if that big bad new GPU uses only 100W when all the prior coins have been created at 200W, then and only then is there a real problem. And I proposed a semi-solution to this:

To reduce the effects of this happening, EnCoin may have another form of built-in deflation: gradually increasing the amount of time (per solution) it takes to create coins, over time. For example, today, if it takes 6 hours for an average FreeNet to find a solution, then tomorrow—what tomorrow means is not yet defined but must be worked out in the development process—it may take 7 or 8 hours or even 10 hours for an average FN to find a solution. If the energy usage used to create coins stays stable or increases, users only need to adjust the output of their computers as described in the case of increasing energy usage. If the energy used to create coins does in fact decrease, then they keep running at full power and “cheap coins” are not added to the economy.

In thinking more on this, the only real way to do this is to increase difficulty for no reason. The amount of coins can't be controlled this way (I suppose if they were on a 10 minute timer they could, there are other options to explore). So "koomey's law" would probably have to be used for gradually increasing difficulty over time (1.57 years to double computations per kwh) if it doesn't increase by this much at least naturally. Since the idea of a constant generally sucks, imo, I think at some point down the road developers may have to intervene. Nobody can predict the future based on the past.

The price of electricity could rise faster than inflation, or it could lower in the case of a new source of energy. Computations/kwh may double every 1.57 years forever, or they may hit a ceiling. Without a doubt they will go through slow periods. None of this can be accounted for now. So in that sense, the proposal is a failure. But throwing ridiculous scenarios at it to disprove 1 ENC = 10kwh does not help or solve anything, especially considering I already more than accepted this.

[Red]

So, given the above post about electrical efficiency.

In any system where stable coin value is a priority, (Exchange or no-exchange) as coin values approach stability, electrical efficiency becomes exponentially more important. If coins trade within 1% of minting cost, and I can mint for 2% less than you. Then I can mint and your can't. This is not so much a competition as an unavoidable axiom. (The efficient drives out the less efficient.)

You suggest everyone competes for the same batch of coins, all wasting resources and only one benefiting. Where are the savings, exactly?

Since I can't remove the axiom I'm attempting to use it as a feature.

The most electrically efficient state of the system, is where NO ONE has incentive to mint at all. This does not effect continuity of the network. Merchants continue to make money, clients continue to see the efficiency of the system as a personal benefit. It just means arbitragers don't mint, don't make profit, and don't extract value from the system in anyway.

Optimally, this would be the stable currency state. No new coins are required. No minting is done. No arbitraging is done.
However, I couldn't get my system this optimal. Maybe it is possible but I haven't notice that solution yet.

In the -1, 0, +1 system I proposed, in the stable state, some minting is required. However, it is collaborative (like you are proposing) and it does NOT involve arbitragers. In the stable state, only people with transactions will attempt to mint. If enough people attempt to mint, EVERYONE's tax is refunded. This is in effect a consensus vote that coin values are stable. It requires the combined tax rebate pool to spend only 1/2 the number of hashes as it would take arbitragers to create new coins.

The under valued state is the most efficient in my proposed system. If coin values are below stable values, nobody will mint at all. This serves two functions. Most importantly, it represents a consensus vote that coins are undervalued. Second, it removes all excess overhead from the system when overhead is the biggest hinderance to coin value recovery.

The over valued state is the only time Arbitragers attempt to mint at all. For maximum savings (to the system as a whole) arbitragers should mint as quickly and efficiently as possible. So if the most efficient minter can bring the value immediately back to stable himself that is optimal. If that is not possible other less efficient minters can step in to lend a hand.

That an eventual technological elite monopoly will occur to force out competition? And no one will ever contest it? And somehow this is inflation-proof? Instead of money going to the electric company, money goes to the elite, but yet everyone else benefits because less electricity was wasted? What is to keep them honest about keeping the price stable instead of just going for the more immediate profit (or the longterm profit in hoarding)? Goodwill towards mankind?

The goal is that no monopoly of minters be allowed to drive the prices away from stability. (Tending prices toward zero or toward infinity.) That is how to best judge what I suggest. If we can show multiple solutions meet this goal, they can be ranked by how far they allow the stable prices to shift when drastic economy changes occur.

[Etlase2]

So, given the above post about electrical efficiency.

In any system where stable coin value is a priority, (Exchange or no-exchange) as coin values approach stability, electrical efficiency becomes exponentially more important. If coins trade within 1% of minting cost, and I can mint for 2% less than you. Then I can mint and your can't. This is not so much a competition as an unavoidable axiom. (The efficient drives out the less efficient.)

This already would happen in my proposal. The newer GPUs oust the older. The older will still be profitable for a time, but the difficulty will increase as more and more new GPUs are added to the pool, eventually weeding out the old. The new GPUs can either take the coins while they have the opportunity, or make less coins and keep the difficulty down. But eventually, people are going to see the opportunity and make more coins, especially if there's an expansion.

In the -1, 0, +1 system I proposed, in the stable state, some minting is required. However, it is collaborative (like you are proposing) and it does NOT involve arbitragers. In the stable state, only people with transactions will attempt to mint. If enough people attempt to mint, EVERYONE's tax is refunded. This is in effect a consensus vote that coin values are stable. It requires the combined tax rebate pool to spend only 1/2 the number of hashes as it would take arbitragers to create new coins.

But then it costs money to maintain this stable state, does it not? Minters are paying to receive their transaction fee back. What are we using to determine this stable price? Do we use the original cost to produce?
How do we determine how money initially enters the economy? --this has a big effect on what would be considered stable, imo.

The under valued state is the most efficient in my proposed system. If coin values are below stable values, nobody will mint at all. This serves two functions. Most importantly, it represents a consensus vote that coins are undervalued. Second, it removes all excess overhead from the system when overhead is the biggest hinderance to coin value recovery.

Aren't we burning the picture of burnt wheat here to return to stability? I came up with a solution to solve this, and you are reintroducing it.

The over valued state is the only time Arbitragers attempt to mint at all. For maximum savings (to the system as a whole) arbitragers should mint as quickly and efficiently as possible. So if the most efficient minter can bring the value immediately back to stable himself that is optimal. If that is not possible other less efficient minters can step in to lend a hand.

But why are these arbitragers doing this when it's over valued? When is it considered over valued? How do you separate these arbitragers from the rest of the population? How do you think you can keep it a secret (if this is still what you're basing this on) that the arbitragers are doing this for exceptionally small amounts? Do you think, for example, awarding 10 or 12 ENC for the highest levels of reputation would suit this purpose? But this is obvious, and likely it will make people angry. If all the motive here is to sell, what is to prevent them from using this ability to "arbitrage" during times of stability? Your answer is increased difficulty. But that brings me back to the question of what determines stability. Since "the people" don't decide when to arbitrage, the "arbitragers" decide what stability is. And the funny thing is is that they could arbitrage themselves a lot of money, raise the difficulty so that it isn't profitable to refund transaction fees, and then sell when demand is high. And they create a never ending cash flow straight to their pockets. I see ripe potential for abuse.

The goal is that no monopoly of minters be allowed to drive the prices away from stability. (Tending prices toward zero or toward infinity.) That is how to best judge what I suggest. If we can show multiple solutions meet this goal, they can be ranked by how far they allow the stable prices to shift when drastic economy changes occur.

Again, define stability. In my system, 1 ENC equals the average price the minting world pays for the electricity (AND associated costs) to mint 1 ENC. It is sort of a self-fulfilling prophecy. The only problem is you can't be sure 1 ENC costs the same to make in 2022 as it did in 2012.

Instead of koomey's law or any other constant, what I think is worth discussing is changing the award with some kind of modifier. This would actually work for my deflationary scenario that I talked about earlier (extending the 6 hours to 8 or 10 hours). If more coins are required, more people are required to produce them. In 15 years, if you only get 3 ENC for a block instead of 6, you make sure you're using 100W instead of 200W or you're minting for a loss (unless the price of electricity has halved [adjusted for inflation]). So twice as many people are required to mint the same number of coins, BUT for the same amount of electricity. If demand is not high, then twice as many people do not need to mint coins. I have to think more on this. Think there are any equations or algorithms that could possibly determine when to change the awards?

[Etlase2]

I mentioned in another post that I'm really not so worried about inflation anymore. This isn't going to be bitcoin where so much interest is generated on trying to make a profit off of latecomers. REAL speculators could come in, see that it is obvious that the coins are selling for less than what they cost to produce. Buy them up, hoard, and wait for the economy to grow again. If nobody is minting, could a possible incentive be to redistribute transaction fees (ones that actually got burned, not the ones that merchants get refunded) based on the percentage of coins owned? Would it ever make up a significant amount of money to incentivize hoarding? Is incentivizing hoarding in this way bad for the economy during inflation? It wouldn't seem that way. We want circulation to go down, right? Isn't that the same as burning coins in the short term? And then in the long term, those coins don't need to be remade.

Should burned transaction fees always be redistributed this way? It creates another incentive for demand. And this could potentially counteract the reduced cost to produce of an ENC in the future.

Wow. Is this the solution?

edit:
Ran a quick scenario, 50k savers with an average of 1k enc each, 50k spenders with 500 enc each putting 0.10 enc each in fees into the economy a day
Assuming 75% of these fees are refunded to the merchants, a 1k savings will earn you 6 enc a year, or 0.6%. Not that bad considering price inflation should be at a minimum.

[Red]

I'm going to respond to this tonight because I read this post earlier and I've been thinking about it already. I'll respond to the others later.

OK, I get what you are trying to say. (I Hope!) To paraphrase:

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Each minter uses the same proof-of-work difficulty for minting.
As such, the value of ENC will tend toward the electrical consumption of the most electrically efficient minter. (MHash/ws)
Left alone, this electrical consumption would tend to decrease over time according to Koomey's law.
To return ENC minting to its original electrical consumption constant,
EnCoin offsets Koomey's law by doubling the proof-of-work difficulty every 1.57 years.
---

This makes total sense to me. I completely agree with this statement. I really hope it is what you have been trying to say.

Now a little needless bitching.

To approach the value of 1 ENC equaling 10kWh of electricity, the Network makes a very big assumption that the average computer is using 200W of electricity dedicated to the process of creating coins. If the average computer is instead using 100W or 300W, this by itself poses no problem—the sell price and value of 1 ENC will simply reflect that amount of work instead (5kWh or 15kWh respectively). The 200W figure was chosen because that is a ballpark estimate that is quite reasonable based on modern computers of today.

The part that needlessly confused me for two weeks was your use of averaging. While it is true that if one guy mints coins for 8 kwh and another mints coins for 10 kwh, the average amount of electrical consumption is 9 kwh. You seemed to also be saying that the sell price and value of each coin will reflect this 9 kwh average.

That seems ill conceived. In a marketplace, all the lowest price ENC sells first. Higher prices might not sell at all. Thus prices would tend toward the lowest cost, not the average cost.

I know now that is not what you were attempting to say. You were trying to say the more general, "If peers use more electricity prices will be higher. If they use less, prices will be lower." The use of specific numbers made it seem you were proposing precise targets.

If [in the future] the average user would be using less than 200W, then a problem arises. If, for example, 1 million coins were created at a cost of 10kWh each then another million coins were created at a cost of 5kWh each, the combined value of the coins would be 2 million @ 7.5 kWh. This means that coins saved go down in value (NB: compared to themselves; fiat inflation and increasing electricity prices may easily counteract this). Based on current and past indicators, the likelihood of this happening is low but not impossible with future technology.

This goes down as the worst sentence of the entire proposal! It made me think you were dismissing the likelihood of electrical efficiency increasing. All the talk about sunk costs, and the expense of upgrading made it seem like you were framing changes in overall efficiency as implausible. Having zero discussion of how you methodically change the difficulty level made everything seem even more hand wavy. "If in the unlikely chance that technology improves, we'll fix things by voting to change the difficulty." it was not very inspiring.

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But anyway, I now understand the main trust of your proposal. (I hope.)

Perhaps my suggestion for phrasing it with help make your proposal easier for other doubters like me to wrap their head around.