Spin-offs: bootstrap an altcoin with a btc-blockchain-based initial distribution

[Peter R]

One recommendation would be to remove the section_ids (as the records are self describing) and instead add a value (in bytes) to the header with the offset to the first record of each type.

For example in your sample the offsets would be
0x01 = 4800000000
0x02 = 9F00000000
0x03 = BC00000000
0x04 = 2A01000000

Agreed.  This makes the body of the file a contiguous list of claims but still allows for fast searching. 

Here is a good native multisig (vout:2) to use in your example instead of a fake one 14015bd586c0c7a28979ca294b114441f23bfc97be17cd6077b9e12e2709fec3:2.

Thanks.  I'll update the example files when I make the other updates and after people have had a chance to comment. 

By the way, do you think my requirement that the claims in snapshot.bin are sorted is overkill?  I did it for two reasons: (1) to permit efficient searching, and (2) as part of making the snapshot file a deterministic output of the block number. 

Also, the more I think about Smooth's suggestion to provide a Merkle-branch as part of the claim TX, the more I like it.  It means that as long as one trusts that the Merkle root in the genesis block corresponds to that from a legitimate snapshot, he can verify any particular claim TX with just the TX itself (without looking anything up in snapshot.bin).  The method seems more transparent, as it puts the onus on the claimant to provide proof (which gets mined when he is awarded his spinoff).  It also simplies the genesis block requirement for spin-offs: only the MerkleRoot is needed (along with the bitcoin blockhash for SCV).  I think this should be the recommended manner in which a spin-off verifies a claim, even though it increases the blockchain size if a large number of claims are eventually made.   

[smooth]

It also simplies the genesis block requirement for spin-offs: only the MerkleRoot is needed (along with the bitcoin blockhash for SCV).  I think this should be the recommended manner in which a spin-off verifies a claim, even though it increases the blockchain size if a large number of claims are eventually made.    

If a claim can reference an earlier claim you can avoid duplicating internal hashes. A valid proof need only reach a hash previously proven to have a path to the root.

[alexkravets]

It also simplies the genesis block requirement for spin-offs: only the MerkleRoot is needed (along with the bitcoin blockhash for SCV).  I think this should be the recommended manner in which a spin-off verifies a claim, even though it increases the blockchain size if a large number of claims are eventually made.    

If a claim can reference an earlier claim you can avoid duplicating internal hashes. A valid proof need only reach a hash previously proven to have a path to the root.

Very nice, potentially a huge optimization

[smooth]

Looks like Stellar is distributing some of their coins as a Bitcoin spin off.

https://www.stellar.org/about/mandate/#Bitcoin_program

[joe 90]

Looks like Stellar is distributing some of their coins as a Bitcoin spin off.

https://www.stellar.org/about/mandate/#Bitcoin_program

Clam, lottoshares, and stellar are all using this idea. It's catching on.

[alexkravets]

Stellar is unfortunately not a pure spin off and BTC claims will be available "real soon now or in 6 months or so".

Somebody will eventually do a pure Spin-off of Ripple tho ...

[Peter R]

Snapshot file format update

The snapshot file format has been updated along with the example file and example Merkle tree, based on D&T's suggestions.  


Visualizing the Merkle branch claim proofs

I was playing around with the new Wolfram Cloud Computing platform, and I wrote a little program to generate an image of the Merkle branch for a user-specified claim.  This branch (along with a valid signature for FCV or verfied OP_RETURN claim for SCV) contains all the necessary information to validate a spin-off claim.  Here's the Merkle branch for Claim 3 from our example snapshot.bin file:




The real snapshot.bin file will be a lot bigger, but the Merkle branches are still quite manageable.  Here's what one would look like (note that I am using a fictitious snapshot.bin file until I get the real one).  




The Wolfram cloud computing platform is pretty interesting.  For example, you can publish an API to the "cloud" with a single function call.  I wrote a simple API to retrieve the HEX encoded claims + associated Merkle branches and I can make this public when we have a real snapshot.bin file to experiment with.  

[Peter R]

Looks like Stellar is distributing some of their coins as a Bitcoin spin off.

https://www.stellar.org/about/mandate/#Bitcoin_program

Yes, I noticed that too.  It's nice to see the idea catching on, but I was disappointed (like alexkravets pointed out) that only 20% of the pre-mine is awarded according to this principle.  

[Peter R]

The link that Smooth posted explains that 19% of the pre-mine will be awarded to bitcoin holders in proportion to their holdings at the time of the snapshot.  So this is much more like a spin-off than Clams (that simply gave out "something" to various bitcoin addresses).  



There's no information about how they are dealing with P2SH, native multisig and raw script outputs.  This combined with the fact that the claim service won't be operational for six months tells me that they haven't really started thinking about the more subtle implementation details.  

I hope that Stellar developers consider using a snapshot.bin file in the format specified in this thread and making this file public for inspection purposes prior to the launch of their claim service.  I expect we will have tools to automate this snapshot process ready some time in September, potentially saving a lot of work.  

Based on D&T's analysis, we've proven that using the format proposed in this thread, that ~99.8% of the bitcoin wealth can be claimed with a simple "bitcoin-signed message" and 100% can be claimed using the SCV proposal.  This is a significant improvement compared to naively tabulating the P2PkH outputs.  

Are there any Stellar developers reading this thread?  

[smooth]

Peter R have you looked at my idea of pruning claims? In your example above, if 4efe wants to make a claim after 018f has done so, I don't another proof is needed. The first proof also serves as a proof that the second claim is valid. This can occur at any branch. I haven't really thought this through though.

[Peter R]

Peter R have you looked at my idea of pruning claims?

Yes I did.  It certainly works, but now that I fully realize how small the Merkle branches are, I'm not sure it's worth the added complexity.  

Using 160-bit hashes, each Merkle branch is only ~21 x 21 = 441 bytes long.  This is about the average size of a bitcoin TX.  Of course, this 441 bytes is in addition to the signature and other claim TX details, but still the vast majority of claim TXs should come in less than 1 kB.  A blockchain (with a tiny genesis block) that grows at less than 1 kB/claim seems very acceptable to me.  
 

[smooth]

Peter R have you looked at my idea of pruning claims?

Yes I did.  It certainly works, but now that I fully realize how small the Merkle branches are, I'm not sure it's worth the added complexity.  

Using 160-bit hashes, each Merkle branch is only ~21 x 21 = 441 bytes long.  This is about the average size of a bitcoin TX.  Of course, this 441 bytes is in addition to the signature and other claim TX details, but still the vast majority of claim TXs should come in less than 1 kB.  A blockchain (with a tiny genesis block) that grows at less than 1 kB/claim seems very acceptable to me.  
 

Seems very reasonable. Makes the verification code tiny, with just a single input (root hash), no need to store a database of claims. So that makes sense.

[Zer0Sum]

It is obvious from reading the speculation forum (and reddit) that only those with the conviction to hodl actually hodl, and those strongly tend to be people who both understand Bitcoin at a deep level (aren't spooked by FUD) and understand the necessary aspects of investing (aren't spooked by volatility because they understand the dynamics of the binary bet and exponential growth). When bitcoin went from under a dollar to over $30, then down to $2 over the course of a single year, the market was shaking out the weak hands - the poor speculators - in a spectacularly violent fashion. But what is this volatility optimizing for - that is, who's this market making rich? Here are some obvious ones:

1) Good hodlers, people who deeply grok Bitcoin and its investment aspects, who will likely dishoard in an organized fashion at peaks, dampening the bubbles and not contributing to the panic knifedowns nor to the FUD-based selloffs

2) Good traders who see the big picture, thereby decreasing the volatility

3) Perhaps warranting their own category are the people who have extremely deep or highly technical understanding of Bitcoin, to the level of what would almost seem to others like "insider information" (though there's nothing bad about this; in fact it's a good thing, if you follow the reasoning outlined above)

The main point is, besides some people who got lucky, the Bitcoin ledger is held mainly by people who most strongly believe in and most intimately understand Bitcoin (and understood it early!) and the relevant investing principles, or those who have actually contributed materially to the ecosystem. These people are far more likely than others to know where resources should be diverted to in the economy for maximum benefit to the community, and the maturity of the Bitcoin ledger ensures that they actually have the ability to command such resources (i.e., they have accumulated a lot of bitcoins to invest in infrastructure, and they have relatively little competition from unskilled investors who fund dead-end projects that waste dev time, etc.).

As someone who has made several million trades on the NYSE, etc
And probably understands how a guy like Jim Rogers thinks quite well...
I would argue exactly the opposite.

We all know many Family Guys whose SOLE major lifetime investment is a house...
And that house over 30-40 years has usually appreciated 10-20 fold...
Primarily because this type of person is unsophisticated, conservative, and afraid to sell.

So for all the wrong reasons Family Guy is a cash poor "millionaire"...
But by your reasoning would be considered a Real Estate Expert.

In fact, Family Guy probably considers himself a Genius...
As do most people that randomly "got lucky" one way or another. 

Translate this unsophisticated "fear of selling" inertia to Bitcoin...
And you have a slew of very ordinary people that have RANDOMLY become Bitcoin millionaires...
But view themselves as genius level investors...
And are mistakenly viewed as such by people like yourself.

I would bet that these random BTC millionaires will never hit another home run...
And that their Crypto investment opinion is completely random...
I could name names of such people who are conscripted HERE to promote various Alts.

Conversely, actual genius level people sophisticated in the markets or engineering...
Would have behaved in a much more cautious, diversified, contrarian manner = avoiding the herd...
And be mid-level Bitcoin holders in the 5 to low 6 figure range.

A specific example (whom I've met) being Peter Todd...
Who had about 100 BTC... and sold 50% a few months ago saying BTC could go to zero...
Which shows great decisiveness and independent thinking.

Jim Rogers has made his fortune as an extreme contrarian also...
Would not have slavishly followed a cultish herd for many years.

Believing that Bitcoin can only go up... and can never be severely disrupted... is extremely naive.

[Adrian-x]

At Zer0sum I think you're probably 64.3% correct , I only know a fiew investors in Bitcoin personally and have come to know a fiew here on Bitcoin talk. To summarize dumb luck accounts for those who invested a trivial amount and are happy to hold. But talking from my experience some who invested a larger amount pulled out there initial investment weighing the risks and then as dumb luck would have it they are more comfortable holding.

All in all I think your critique is fair but doesn't undermine the idea that the current distribution represent the most efficient coin distribution.

[Zangelbert Bingledack]

Zer0Sum,

Certainly there are some lucky/stubborn investors, but I take seriously the points made throughout the entire discussion linked in the passage you quoted, not just the OP. In particular, it takes an extremely stubborn investor to continue living paycheck to paycheck (for example) while maintaining hundreds of thousands or millions of dollars in an asset that could go to zero at any time. To bring up such people only seems to reinforce the point: their existence is minimized thanks to Bitcoin's extreme volatility over the years.

As far as real estate, I think there could be a lot more involved in the inertia of "holding" a house. Moving can be a huge deal both logistically and psychologically, and it seems there is a somewhat unique psychology to home ownership in the first place, as seen in the proverbial expression, "A man's home is his castle." A better example would probably be something like Google stock.

[Nerian]

I see this as a fantastic idea solving some problems. It is incomplete, but it is damn amazing. Bitcoin is king, but innovation needs to continue. Competing cryptocurrencies are inevitable and a healthy part of the market. People benefit by having the ability to choose the coin that best serves their interests. Various anon coins are a great innovation (darkcoin et al), as are coins that use more rounds of hashing, and so on. Some coins give real tangible benefits over the original Bitcoin in a technical respect. However, I want to consider the following objection:


Slumbering coins:
A new innovative coin appears. The distribution is done via bootstrapping on the bitcoin blockchain. Initially 5% of coins are claimed. These coins circulate. The coin has a small coin base. People see the use of the innovate coin and buy in. The price goes up. As the price goes up, slumbering coins become worth more and more, but since they are slumbering they remain unclaimed, and unsold. The price goes up more. Now the price of unclaimed coins starts to shock a few people. "I have x amount of coin on the initial nucleus.... Hrm. I can make $2 by claiming my coin? Why the hell not?" A few people start telling their friends they made a few bucks selling off their coin. People love free money. This ensures that the coin cannot increase in value much before new coin are released into the money supply. This ensures a constant roll out of coin.

Rich claimers:
Anyone who is able to claim a large percentage of the coin is certainly someone who is or was rich in bitcoin. Rich people are many things, but they are usually not stupid. If the coin starts to reach a price where they can make a decent chunk of change, they will pay attention. They will be made aware. They know that if they dump their claimed coin all at once, they themselves will drive the price down lowering the return on their coin and their profit. Hence, it is in their selfish interest to sell off the coin slowly, over a period of time, say months or a year, thereby maximizing their profit. Trusting people to be selfish is a safe bet.

In case of mass sell off by a reckless claimant, the community will happily buy the discounted coin, knowing that the price will return to normal if the fundamentals of the coins innovative value are real.

Secondary benefits:
As the coin grows in value, a chain reaction of word of mouth makes the coin known.

[Peter R]

I see this as a fantastic idea solving some problems…

Slumbering coins:
A new innovative coin appears. The distribution is done via bootstrapping on the bitcoin blockchain. Initially 5% of coins are claimed. These coins circulate. The coin has a small coin base. People see the use of the innovate coin and buy in. The price goes up. As the price goes up, slumbering coins become worth more and more, but since they are slumbering they remain unclaimed, and unsold. The price goes up more. Now the price of unclaimed coins starts to shock a few people. "I have x amount of coin on the initial nucleus.... Hrm. I can make $2 by claiming my coin? Why the hell not?" A few people start telling their friends they made a few bucks selling off their coin. People love free money. This ensures that the coin cannot increase in value much before new coin are released into the money supply. This ensures a constant roll out of coin.

Yes, and it also ensures that a broad spectrum of the cryptocurrency community can vote either for or against a particular technology.  If the coin goes up enough that suddenly I can make 1 BTC by dumping my spin-off, well I'm really going to consider doing that.  The only way the market cap will continue to grow is if the economic majority of bitcoin holders actually believes that the new technology is useful.  And if the new technology is useful then it should be used, so spin-offs seem to create the right incentives.

Hopefully we get some hint as to how this plays out with Stellar.  19 billion coins will apparently be distributed according to the spin-off principle.  Right now the current price of 1 stellar is $0.004286.  If I did my math right, this means that bitcoin holders holding 1 BTC, 10 BTC, 100 BTC and 1000 BTC would earn:

1 BTC  ->  $6.26 by dumping their stellar spin-off
10 BTC -> $62.60 by dumping
100 BTC -> $626 by dumping
1000 BTC -> $6260 by dumping

I know what I'm going to do with my free stellar if these prices hold

[gatra]

1 BTC  ->  $6.26 by dumping their stellar spin-off
10 BTC -> $62.60 by dumping
100 BTC -> $626 by dumping
1000 BTC -> $6260 by dumping

I know what I'm going to do with my free stellar if these prices hold

no way. When you start dumping, price drops. So it's not linear, there isn't enough buy support to dump 1000btc. Even dumping 1btc will lower the price!

[gatra]

Hence, it is in their selfish interest to sell off the coin slowly, over a period of time, say months or a year, thereby maximizing their profit. Trusting people to be selfish is a safe bet.

trusting people to be selfish is a safe bet, granted, but trusting them to be smart enough to realize how to maximize their selfish interest is not a safe bet.

[FreeTrade]

I see this as a fantastic idea solving some problems. It is incomplete, but it is damn amazing. Bitcoin is king, but innovation needs to continue. Competing cryptocurrencies are inevitable and a healthy part of the market. People benefit by having the ability to choose the coin that best serves their interests. Various anon coins are a great innovation (darkcoin et al), as are coins that use more rounds of hashing, and so on. Some coins give real tangible benefits over the original Bitcoin in a technical respect. However, I want to consider the following objection:


Slumbering coins:
A new innovative coin appears. The distribution is done via bootstrapping on the bitcoin blockchain. Initially 5% of coins are claimed. These coins circulate. The coin has a small coin base. People see the use of the innovate coin and buy in. The price goes up. As the price goes up, slumbering coins become worth more and more, but since they are slumbering they remain unclaimed, and unsold. The price goes up more. Now the price of unclaimed coins starts to shock a few people. "I have x amount of coin on the initial nucleus.... Hrm. I can make $2 by claiming my coin? Why the hell not?" A few people start telling their friends they made a few bucks selling off their coin. People love free money. This ensures that the coin cannot increase in value much before new coin are released into the money supply. This ensures a constant roll out of coin.

Rich claimers:
Anyone who is able to claim a large percentage of the coin is certainly someone who is or was rich in bitcoin. Rich people are many things, but they are usually not stupid. If the coin starts to reach a price where they can make a decent chunk of change, they will pay attention. They will be made aware. They know that if they dump their claimed coin all at once, they themselves will drive the price down lowering the return on their coin and their profit. Hence, it is in their selfish interest to sell off the coin slowly, over a period of time, say months or a year, thereby maximizing their profit. Trusting people to be selfish is a safe bet.

In case of mass sell off by a reckless claimant, the community will happily buy the discounted coin, knowing that the price will return to normal if the fundamentals of the coins innovative value are real.

Secondary benefits:
As the coin grows in value, a chain reaction of word of mouth makes the coin known.

We're exploring some of these ideas in practice with LottoShares.

For the Dogecoin and Bitcoin distributions, they weren't proportional, so 250,000 DOGE holders can claim 80 LTS, and 1,000,000 BTC holders can claim 20LTS, USD value currently about $8 and $2 respectively. As LTS value rises, the claim value rises and more users find the potential reward worth their time. It's a Proof-of-Spare-Time  . . . it might take 1 hour of your time to claim your LTS and sell them, so the distribution is skewed toward the Time Rich, Money Poor. (aka The Poor).

There is also a proportional distribution to PTS, MMC, AGS holders who are more savvy, but likely not smart and rich enough to hold for long-term self interest. The approach taken here is vested shares . . . their 'slumbering' shares vest gradually at random times over the next 12 months or so. We'll see how it goes.