GEM - as a potential stable value currency

[Red]

Is this better?

I wasn't attmpting to mock you or derail my own thread. I just thought your particular "phrasiology" seemed humorous and worthy of a shared giggle. No harm intended.

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[ripper234]

There was a risk in investing money and time in Facebook's development.

So how does anyone other than satoshi bear that risk for bitcoin? How do people joining a website or mining some coins for a couple dollars in electricity bear a risk? ohnoos I wasted $3 to mine 50k coins...

So yes, there's a risk, and appropriate rewards. My subjective belief is that (Risk X Potential Reward) in Bitcoin currently outweighs any other investment I know.

And your subjective belief is completely unclouded by the fact that for that reward to increase, bitcoin needs more suckers who need to be convinced that they too will earn this wonderful return.

<ripper furiously responds with a link to the bitcoin wiki that adamantly states that bitcoin is not a pyramid/ponzi scheme as proof that it's not!>

Please, if you use Google Calendar or some other system, set up a reminder for yourself for ... let's say 3 10/10/2014, to check back at this thread.
If I'm right, at Bitcoin is worth significantly more than 4$ a piece, drop me a line at ron.gross@gmail.com.

Red - no worries. I just heard the "bitcoin is ponzi scheme" argument a bit too much, and am perhaps a bit sensitive. I can see the humor

[Etlase2]

Why, pray tell, would I care if your totally vague statement is right or wrong? I could point out various posts on this board that claimed bitcoins would be worth $100 by now or the end of the year. I don't care if you think a ponzi scheme is an investment, but I will be doing my best to educate newcomers that it is not--even though the price of bitcoin has done a pretty good job by itself.

[steelhouse]

I don't like any currency that involves mining.  Especially with my sour grapes of mining solidcoin for the 1st 8 hours with 50 KH/s and getting nothing but shares.

[bulanula]

I don't like any currency that involves mining.  Especially with my sour grapes of mining solidcoin for the 1st 8 hours with 50 KH/s and getting nothing but shares.

Interesting would be a cryptocurrency without mining. You get coins for doing work etc. !?

[Red]

Oh, so difficulty is solely dependent on time? Hashing power does not affect it at all?

Yes, that is correct.

Mining becomes non-competitive and based purely on the self-interest of each miner. This self-interest is held in check by very real electric bills.

Yeah, it's kinda hard for me to visualize how it works without the whole picture. And no need to go out of your way to compare it to my idea. My log curve is flawed anyway in that it will tend to deflation in the long term because it requires Koomey's Law to continually accelerate to remain stable.

I'm typing it now. Need a few more minutes.

[Red]

Second Order (Economic) Dynamics

Rather than trying to detect basket-of-goods prices, GEM leaves that to humans. Instead GEM detects the "human" consensus on the GEM supply itself (too high, just right, too low). To do this, we *require* human mining behavior to follow personal self-interest. Each miner knows their own mining costs and can determine their personal ROI on any GEM transaction. Stable monetary policy is means actively balancing the natural pressure to increase the GEM supply, with a downward counter-pressure to stop runaway increases.

Upward: Each miner is allowed to non-competitively mine GEMs whenever they see profit. When their personal ROI goes to zero, they stop mining.
Downward: GEM uses a fixed percentage transaction fee to avoid runaway GEM supply growth. The particular fixed percentage is probably important, but not for this conversation. The transaction fee is destroyed.


Primary Monetary Detection

We detect the system wide mining consensus by measuring total GEMs mined versus total transaction fees over fixed periods. (Say bitcoin like, 10 minute periods.) That gives the ratio (total mined/trans fees) that I'll use in examples below.

(total mined/trading fees) = 1
If you are mining exactly what it take to replace your fees then there is a 100% consensus that the money supply is "just right". Who should receive the newly mined GEMs is NOT really a monetary policy decision. But in GEM's case, the miners keep their spoils.

(total mined/trading fees) > 1
This ratio is unbounded, so it has no way to express 100% consensus that the GEM supply is "too low". But the farther this ration moves above one, the closer you get to that consensus. The farther this ration tends above one, the faster GEMs are being added to the economy.

(total mined/trading fees) < 1
If this ratio is zero, there is a 100% consensus that there are too many GEMs currently available for circulation. The closer this ratio gets to zero, the faster surplus GEMs are being destroyed by the transaction fee.



Dynamic Monetary Adjustment - Springs and Shocks

Note that the above primary forces tend to act linearly. However, there will be times with more dramatic economic changes. (say Walmart starts taking GEMs) In these cases we'll need for more dynamic changes in the GEM supply. In support of this, GEM provides two periodic non-linear forces. The "Deflation Spending Subsidy" and "Inflation Panic Tax".

(total mined/trading fees) = 1
If you are mining exactly  what it take to replace your fees (ratio near 1), there are no additional taxes or subsidies necessary.

(total mined/trading fees) >> 1
If this ratio tends far above 1, GEM aims to do three additional things:
1. Avoid removing GEMs from circulation by rebating fees.
2. Encourage hesitant buyers to buy NOW! (Stop hoarding GEMs)
3. Discourage sellers from panicked selling of goods. (Hoard goods)

As this ration tends above 1, the fixed transaction fee fights against our monetary policy goals. It is destroying GEMs during a period where everyone is in agreement that more GEMs need to be mined. GEM mitigates the consequences of this through a deflation spending subsidy. The goal is to redistribute the transaction fee to those it should never have been taken from.

(total mined/trading fees) << 1
If this ratio tends far below 1, GEM aims to do three things:
1. Destroy additional surplus GEMs, by taxing panicking buyers.
2. Encourage potential buyers NOT to buy. (Hoard their GEMs until prices recover)
3. Encourage potential sellers to sell NOW! (Stop hoarding goods)

Psychologically, I charge the *panic* tax ON TOP OF the price the seller is asking. As opposed to requiring the seller to hide that included tax in his price. The former tends to make clear to *panicked* buyers that prices are *already* considered too high. It also makes it clear to sellers that NOW is a great time to actually close the deal. The later tends to encourage sellers to inflate their prices (which is what we are fighting against). And if they think prices are moving higher, they are further encouraged to hoard goods.


Deflation Spending Subsidy
In times of deflation, when the money supply is too low. GEM levies an additional deflation spending subsidy in proportion to the standard ratio above. (total mined/trading fees) If mining exceeds trading fees, the mining wealth is shared with those who continue to spend in the face of deflation. The details are hand wavy now, but the concept is to rebate all transactions fees at say (2 mined/1 fee). And to rebate say double fees at (3 mined/1 fee). This encourages spenders and discourages hoarders.

Inflation Panic Tax
In times of inflation, when the money supply is too high. GEM levies an additional inflation panic tax in proportion to the inverse of the ratio above. (trading fees/total mined) As mining moves to zero, the surcharge moves to infinity. This should provide a strong disincentive to panicked sellers. The details are hand wavy now, but that is the concept.

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Going Rogue

Should miners choose to work against their own self-interest, GEM adjusts to make sure each rogue miner's electric company penalties become as high as necessary to end their bad behavior. If the award reduction/difficulty increase keeps everyone else aligned with Koomey's law. (for argument 1 GEM = 10 kwh) Then the run away miner is now mining at 1 GEM = 11 kwh. If he continues to do so causing a GEM glut and price inflation then he is compounding his loss because his 1 GEM buys < $1.

If enough people mine at a loss, it will temporarily trick the system into thinking the consensus is to add more money into circulation. The deflation spending subsidy will begin dumping money into the market. This will temporarily increase inflation for everyone. But inflation hurts the miner's profits, while the subsidy compensates others spenders. This further compounds the runaway miner's losses.

There is no way a runaway miner can profit. Like in Vegas, a time will come when he has to pay the piper. And that electric company piper is a real bitch!

[Red]

(Edit) The previous post was too long so I removed this boring beginning. I'm putting it here for reference incase anyone doesn't get the above bits.

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Economic Dynamics

This section is about adjusting monetary policy in the face of extrinsic inflation and deflation. By extrinsic I mean GEM pricing changes that result from a mismatch between the value of goods available to be traded and the number of GEMs available to be traded.

The hardest thing about monetary policy is the shear number of hidden variables. Nobody knows which GEMs are "available" to be traded vs those which are lost or deliberately hoarded. Nobody knows how much total goods are available to be traded. Nobody even really knows the system wide break even price for mining GEMs.

However, it is easy for humans to measure the success of the system. It's simply a matter of monitoring prices over time. To avoid arguments over terminology, I'll use the following definitions.

--Definitions---
If before prices were:
1 GEM = 1 loaf = $x

Then, if afterward prices are:
1 GEM = 1 loaf = $y
This means pricing is stable and have met our goals. The GEM supply is "Just Right" no matter what direction dollar value moved.

Else, if afterward prices are:
1/2 GEM = 1 loaf = $y
Then goods pricing, with respect to GEM, has deflated. The GEM supply is "Too Low". We should mine more GEMs and discourage GEM hoarding to increase GEM availability.

Else, if afterward prices are:
2 GEM = 1 loaf = $y 
Then goods pricing, with respect to GEM, has inflated. The GEM supply is "Too High". We should destroy GEMs and encourage GEM hoarding to decrease GEM availability.
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[Red]

I edited the above couple of posts for clarity. Just-in-case there are people who don't free like talking about solidcoin.

[Red]

Is there an economic rationale for using the total mined/trading fees ratio as a divisory line between inflation and deflation?

Etlase2 had suggested a fixed fee to exert downward pressure on the EnCoin supply. He used that to rationalize minters needing to mint continuously to replace fee coins. Basically GEM is a variant on his ideas. Since I began with the fixed fee and constant electricity mining. Fees and mined GEMs were the two easiest quantities to measure.

If (total mined/trading fees) = 1, then the total GEMs mined equals the total GEMs destroyed. So the number of GEMs in existence remains exactly the same. Since nothing really changes monetarily, I defined that as "just right" (stable).

Rationally speaking, if the number of GEMs in existence is exactly right for the external economy, there is no reason to mine or to take a transaction fee. Everyone should just be left alone to trade among themselves.

Originally, I proposed a different concept where in the stable state, all fees were refunded back to the original parties. In the stable state of that version, miners didn't have to mine, and weren't rewarded for mining. However, that represents a bigger deviation from bitcoin principles and I don't want to take needless tangents.

I agree that if a lot of GEMs are being generated it means there's deflation going on in the market and if very few get generated then there's inflation, but using the trading fees to create that ratio sound arbitrary to me.

I think the ratio = 1 definition of stable is pretty sound conceptually. Defining the fee percentage is going to require some serious arbitrary rationalization!

And just to be clear, blocks always generated a fixed amount of GEM right? There's no mechanism for increasing or decreasing the block reward?

Yes that is correct. At least in respect to the miners. They will always receive the same GEMs for each successful mining proof-of-work.

The non-linear "Deflation Spending Subsidy" however, tends to break all the rules. It is intended to encourage GEM spending and discourage GEM hoarding in moments of deflated values. This subsidy come out-of-thin-air as a result of mining. However, it is paid to those with spending transactions in the previous block, NOT to the miners.

This is the only time I break the 1 GEM = X Joules rule. But it seems fair, since the transaction fee destroys GEMs without refunding Joules at all. Etlase2 proposed banking all transaction fees into a sort of "Deflation Spending Subsidy" savings account. That holds everything to the 1 GEM = X Joules rule should ideological purity becomes a goal.

[Red]

I believe this makes your design broken because the block generation rate will have to get increasingly faster to avoid deflation, until it can no longer get any faster.

There is really no upward bound on how many blocks can be generated in a given period of time. You just have to add more miners.

Let's say that the coin base is 100 million GEM and the annual GDP growth rate is 10%. That means that you have to generate 10 million GEMs in the span of a year, or 19 GEMs per minute, to avoid deflation (assuming constant velocity).

Since they all mine non-competitively, 10% more miners (meaning 10% increase in MHash/s) per year would match your growth rate. However, since we already compensated for increasing (MHash/j) That would mean increasing electrical consumption 10% per year as well.

Years pass and now the coin base is at 100 trillion, while GDP growth is again at 10%. Now you need to generate 10 trillion GEMs in a year or 19 million per minute to keep prices stable.

Wow, that is a vote of confidence! But still, it is just a matter of adding 10% more miners and 10% more electricity.

I'm not saying this concept isn't electrically STUPID! (In fact sometimes it is hard to type this stuff with a straight face.) It just seems like it could be plausible.

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But your statement points out a really important dynamic. I put in the non-linear "Deflation Spending Subsidy" to help in cases like this. I probably should have given this specific example more thought.

Let's consider two different transaction fee rates.

10%: At this rate, miners would have to mine 10% of the existing GEM economy just to keep up. As they mined more than that, it would be supplemented by the subsidy.

So in my hand wavy example, if they mined (transaction fee * 2) GEMs, it would result in 3 GEMs for the price of two. Distributed 2 to 1, between miners and spenders. So you wouldn't really need to mine a full 20% of the economy to get a 10% net increase of GEMs. If they mined (transaction fee * 3) GEMs, maybe it results 6 GEMs for the price of 3. (3 to miners and 3 to spenders.) [Waving Hands]

Reducing the transaction fee,

5%: At this rate, miners would only have to mine 5% of the existing GEM economy to break even. After that the subsidy kicks in. (transaction fee * 2) mining results in 10% GEM growth. So mining 10% of the economy would get you 10% growth.

So the non-linearity really depends on where we set the transaction fees. (2x at 10%) fee = (4x at 5%) fee with a much higher subsidy. (12 for 4)? [Waving Hand some more]

Anyway, I think I used the wrong non-linear subsidy function in the example. I want it to be able to grow fast, but be tied directly to mining effort. And something not too exponential so it doesn't blow sky high if miners over compensate while trying to make a fast buck.

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Do you think an appropriate function exists?

[Red]

I'm not sure it's just a matter of adding more miners as we are limited by latency. The faster the block generation the more chain forks are created, unless that by non competitive mining you mean that timestamps are not used anymore and it's just a grouping of blocks instead of a blockchain. If so then a new problem arises: there's no mechanism to prevent double spending anymore.

Well I have to admit I didn't really try scaling to 100 trillion GEMs. But I did plan on keeping the block chain. If the whole system can scale to handle the transactions a 100 trillion GEM economy needs, I can scale it to handle the additional mining.

Generation could either be implemented similarly to bitcoin but with variable interval blocks as you suggest. Or alternately, GEM mining could be encapsulated as individual transactions. Multiple mining transactions would be placed in each fixed interval block just as is done with other transactions. Both ways of course beg the question of how the system would deal with chain forking and reconciliation.

I'm proposing a dynamic mining economy. One where inflationary periods might bring most mining to a standstill. One where deflation will cause miners to come out of the woodwork. And one where in stable periods, the most efficient will tend to drive out the fastest miners.

In GEM The fork with the *most* hashing is not necessarily the preferred one. Therefore bitcoin fork reconciliation rules cannot apply. If they did, in inflationary periods, most any idle mining pool could collaborate to grab 75% CPU. They could then rewrite the chain and double spend at will.

I have a solution of course. I was saving that for the next section though. It uses rolling block locks and a trivialized version of EnCoin's TrustNet mechanism.

[Red]

I'm interested to know how the blockchain works if the chain with the most cummulative difficulty is not necessarily the main chain.

It's really easier than it seems. But it will take me longer to describe it than I have now. I'll write what I can now and clarify later.

The 51% problem is possible because bitcoin allows undetected alternative forks to be created in private. It then makes it possible for malicious parties to require everyone to switch to their "secret" fork because of a mathematical quirk in the rules.

You prevent this by deciding on transaction "confirmation" depth. Say three blocks deep. Then having each peer create a rolling block lock for those committed transactions. In this implementation, it is not possible to require any node to switch to any alternate fork if it requires changing a previously committed block.

What is missing from bitcoin is the ability for anyone to detect that a network partitioning (accidental fork) is currently in progress. What I want to add is the ability for peers on either fork to detect the absence of those transacting on an alternate fork. Making a personal decisions to stop mining or transacting on your current fork becomes much easier if you realize your "personally trusted" trading partners are absent from your current fork.

The block chain implementation is simple. Currently in bitcoin, only mining transactions are validated against the PREVIOUS block in the chain. Regular transactions can be copied and move from one fork to the other with zero knowledge of the account owner. This is what makes fork substitution difficult to detect, except for those who lost the mining transaction in the discarded blocks.

I propose that GEM validate every new transaction against a particular "currently known" block in the chain. That allows any merchant to create an announcement transaction that says, I'm currently trading on this fork. I does this by simply transferring 1 BTC from it's "well known address" to itself.

So if you are mining on a chain and you wish to sell you GEMs at Fred's exchange. But you don't see Fred's announcements in the previous three blocks of your chain. Well then, you are forked, and you should consider whether to continue or stop mining. Perhaps Fred is forked or perhaps totally offline. This is easy to detect if your chain has lots of announcements from other major know merchants. Certainly, it is a good time to check Fred's website or send an email. The point is, you are informed something funny is separating you from your other trusted peers.

More later

[Etlase2]

Aren't you kind of giving the exchanges the power you seemed to worry about? Or at least assumed was inevitable. It seems as if the door is wide open under this system. What if a large conglomerate of businesses decide they want to change the protocol? Change to their system or your coins are worthless. Taking power away from the people and putting it right back into the hands of corporations.

And why work toward hacking this on to bitcoin when bitcoin can't scale? Without deflation, this system will scale even less well. Since the value of coins don't go up, people will continually use the same amount of coins, which means each transaction may have hundreds or thousands of threads to follow. So GEM visa will have to be created and now you have corporations controlling what does and does not get approved, if they so choose.

[Red]

Aren't you kind of giving the exchanges the power you seemed to worry about? Or at least assumed was inevitable. It seems as if the door is wide open under this system. What if a large conglomerate of businesses decide they want to change the protocol? Change to their system or your coins are worthless. Taking power away from the people and putting it right back into the hands of corporations.

I don't think I am giving anyone outsized power. No one can force anyone to change to a particular new client. No one can force anyone to trust anyone else *blindly*. I think those are good principles. SolidCoin implemented a trust model where everyone is forced to trust one known guy, nine unknown guys, and anyone who might get rich. That seems silly.

In your example, say EvilCo bought off all the programmers and one or two exchanges. Now if they tried to do malicious things, all the evidence is public. The other non-malicious humans could just decide not to trust them and continue on. Trust always remains a human decision.

If that forks the chain, then presumably the malicious humans are on one fork and the non-malicious are on the other fork. How you feel about that is really a function of who comes with you to your fork. If you are on the fork with 99% of people, you win. If you are on the 1% fork, you lose. The great mass of humans retain all the power. There is simply nothing EvilCo can do to "muscle" them around. EvilCo has to "market" them around. EvilCo can't even divide the system 50/50 and have both forks continue. That's an unstable state. It's an all or nothing game.

And why work toward hacking this on to bitcoin when bitcoin can't scale? Without deflation, this system will scale even less well. Since the value of coins don't go up, people will continually use the same amount of coins, which means each transaction may have hundreds or thousands of threads to follow. So GEM visa will have to be created and now you have corporations controlling what does and does not get approved, if they so choose.

I'm not attempting to hack anything on to bitcoin. Bitcoin is what it is. I'm just trying to use shared understanding to keep discussion of the interesting bits on track. So far, so good!

I'm not sure what your beef is with the monetary model. It's exactly the same as EnCoin's. I guess you are saying you don't like the in-points transaction out-point structure in the blocks and think balances would be better. That is not part of the discussion I'm trying to have.

Most of your logic about bitcoin not being able to scale is sound. However, it was never meant to scale in the way you say it can't. Peer to peer in bitcoin didn't mean that every client user must be a peer. Satoshi wrote from the beginning that competing transaction processing peers would evolve. Most people would just choose a peer and use bitcoin as a service.

I see that bitcoin is about halfway there now. Mining pools represent the first stage of transaction processing centralization. Eventually someone will re-factor the wallet file to remove the private keys and put them on people's cell phones. Then new transactions will be created and signed offline. Then they'll be sent to their favorite merchant or transaction processor directly. When you think about bitcoin this way, there will be no scaling problems at all.

If I could submit secure GEM transaction from my phone. I'd have no problem using the system without running a peer at all. As long as I know merchants (and others) have a vested self-interest in keeping EVERYONE honest. AND I know these folks won't be blindly trusting ANYONE to remain honest. Then the system is in safe hands.

There should never be a 51% trust problem. That is a silly problem to try and invent. Trust is a human concept that can't be automated. System validity is easier though. If any single human peer working alone can't detect 100% of system wonkiness then you have design issues.

[Red]

Third Order (Social) Dynamics

Systemwide, Bitcoin and GEM have to do the same six things:

0) Broadcast/receive transactions to/from all peers
1) Calculate how many new coins to give out each 10 minute period
2) Decide who to give those new coins to
3) Validate transactions & build new transaction blocks
4) Reach block consensus among all peers on 10 minute intervals
5) Decide how to reconcile multi-interval chain forks

GEM does the (0) identically to Bitcoin, so I won't be discussing it. GEM does, however, reassign some of the latter five responsibilities.

Originally, Bitcoin did all five of these using a single transaction block proof-of-work process. However, pooled mining refactored (1, 2). Mining rewards are detached from transaction processing responsibilities. With pooled mining, the pool operator becomes the actual "Bitcoin "peer". It receives transactions, validates them and builds the blocks (3, 4, 5). The miners themselves avoid these responsibilities and concentrate on hashing (2). This makes pool miners peers among themselves, but not true peers of those who process and validate transactions.

GEM emulates pools in this regard. It treats mining (1, 2) as one problem, and transaction processing (3, 4, 5) as a separate problem.

Bitcoin relies on an algorithm to decide how many coins (1) per block. It then used the proof-of-work as a system wide weighted random number generator (2) to decide who gets them. The combined process is seen as a reward for providing transactional stability.

GEM solves those two problems behaviorally. It lets anyone mine when they see profit to do so. This solves (1 & 2). However, like pooled miners, GEM miners are not required to simultaneously mine and process transactions. Mining rewards answering the "how many new GEMs?" question. It does NOT reward securing transactions.

Securing transactions is assigned to those with a self-interest in secure transactions. This generally means merchants, exchanges, and GEM transaction service providers. These folks profit from GEM clients buying and selling actual goods worth real dollars. Their profit depends on their client's unwavering trust in the GEM system. Clients can go elsewhere. They are never required to trust anyone. Client trust has to be earned.

GEM miners, however, are in a different class than clients. Miners are *required* to trust the system. But, only for a very short period. GEM miners mine only when there is short term gain to be had. They must immediately trade their mined GEMs for someone else's (dollars/goods) before the stabilizing price evaporates their ROI. When there is no profit to be had, miners lose interest. These are not the people who should be trusted with transactional stability.

So who (3) validates transactions? Anyone who wants to be a "full peer" can receive all broadcast transactions, validate them, and build a transaction block every 10 minutes. This activity is NOT rewarded in GEMs. This is done deliberately to minimize the breath of transaction broadcasts. If you care about transactional security/stability you are welcome to join in. You just have to pay your own bandwidth bills.

How do you (4) reach consensus? Easy. You throw dice just like Bitcoin does. Every full peer creates their own block on 10 minute intervals. Then they broadcast the hash of their block and a randomness dependent "fitness function" to the other full peers. Everyone selects the block with the best "fitness", downloads it, revalidates it, then broadcasts an "announcement" transaction to the world.

WTF is a "fitness function". The best example is the bitcoin proof-of-work test condition. The block+nonce must hash to a value less than the target value. In the above example, the "fittest" block could be the one with the lowest value. Or it could be the one with the shorted Hamming distance to the previous block. It really doesn't matter what function you choose. As long as the block creator can't manipulate it trivially.

The function just serves to get everyone to the same starting place. If it turns out the fittest block was created by someone nobody trusts, they can choose the next fittest. Anyone can pick any block, announce their intentions and see who follows them. If nobody does, they can switch to choice most popular among the circle they trust. If nobody trusts their circle, that is no fault but their own. GEM can't make people like you!

The goal is for the block chain and announcements to notify every peer and client immediately if something is going wonkey. If 20 of your trusted peers announced in your previous block, and only 2 in your most recent, you are mining or transacting on a fork or stale branch. Full peers should know this within a few seconds of each 10 minute interval. Miners can be sure of the consensus by pinging a few of their trusted exchanges.

[Red]

5) Decide how to reconcile multi-interval chain forks

This seems like a hard problem but it really isn't. If two forks come from a common chain, and there was an unavoidable network partition, then none of the transactions should overlap. Even if there is partial over lap, once you remove duplicates all transactions should confirm in either order. So, given the two 4 block chain forks that share a common block X:

X, A, B, C
X, D, E, F

Dropping duplicate transactions means the two concatenations below are identical.

X, A, B, C, D, E, F
X, D, E, F, A, B, C

If there are two different transactions trying to consume the same out-points then you have an intentional double spend. This should be flagged for everyone to see and all the referenced out-points should be locked.

The only issue comes from what to do with mining transactions on long forks where transactions from both forks can't be honored. In that case you have to decide which is the major fork and which is the minor fork. The minor fork's transactions get concatenated to the major fork. Decisions like this have to be considered based on the intentions of each forked party. As such they should be human decisions.

However they can be easily automated by pre-negotiating and publishing consensus rules listing well known (non-anonymous) peers. Long forks result from a long term partitioning of the GEM network. The fork most "visible" to the pre-negotiated peers becomes the major fork.

This partitioning could have been accidental (benign) or deliberate (malicious). If it was an accidental partitioning, everyone on the minor fork would know about the partitioning as soon as they stopped receiving announcements. At that point they would know, under published rules, when their mining would be rejected. That allows them to stop appropriately and to begin again once connectivity is restored.

If the partitioning was deliberate, the perpetrators knew in advance their ploy would be rejected. Unless, they had the collaboration of a majority under the pre-negotiated rules. But in that case, the other fork would have noticed the collaborators leave. It would then know in advance it was the minor fork.

If collaborators appear on both branches, then there is clearly a malicious attack in progress. Otherwise, the network would never have appeared partitioned. It is in cases like these, that public disclosure, revoking of trust, and renegotiated rules become warranted.

[Red]

Bumping this because I just got asked the same question in two other forums.

[Red]

I'm thinking about taking a current copy of Bitcoin and forking it into a stable currency model like GEM.

Is anyone interested? I actually have the programming background and skills, but I hate to waste the effort if it will only be interpreted as in attack on Bitcoin.

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I have to admit that originally the concept of burning 36,000,000 joules to create each GEM couldn't be a more stupidly wasteful idea. But after analyzing http://blockchain.info/ for a few days, it is clear that is what Bitcoin is already doing.

Well not exactly, but clearly Bitcoin is not creating coins more efficiently than that. Each Bitcoin created costs, in electricity, almost exactly what its dollar value is. Bitcoin seems to be unique in manufacturing, in that coin manufacturing costs increase and fall non-linearly to match sale price. This is precisely the opposite of most industries, with fixed costs an non-linear profits based on demand & price.

GEM won't be more electrically efficient per dollar, but it will be per GEM. It's manufacturing costs will remain constant per GEM, and will scale linearly with GEM demand. Originally, I expected to do much better than that in electrical consumption. However, I think the wasteful approach would be the more understandable to the initial target audience.

[johnj]

Is anyone interested? I actually have the programming background and skills, but I hate to waste the effort if it will only be interpreted as in attack on Bitcoin.

A bit of your reasoning goes over my head, but I'd mine it. I like the idea of a *coin being tied to something of worth (in this case, power).