[Necro Thread] It's here: The Second Bitcoin Whitepaper

[dacoinminster]

I have spent the last few months writing and editing a document which I am ambitiously calling "The Second Bitcoin Whitepaper".

Today is my birthday, so as promised, I took the day off work to do some final polishing and to publish it for public comment.

Here it is: https://sites.google.com/site/2ndbtcwpaper/2ndBitcoinWhitepaper.pdf

The paper calls for a "trusted entity" to hold funds, hire developers, and probably make a lot of money for themselves. (Read more about it in the whitepaper.) The most important feedback I need from the bitcoin community is who that entity should be.

What company, person, or group of people do you consider most trustworthy to play this role?

I will be online for a couple more hours to answer questions about the paper, then I'll be off to celebrate my birthday and finally publishing this.

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[bitcoinbetas]

You did a splendid job thanks for sharing this I now have some good reading material! 

[cbeast]

I've been wondering when someone would write this. Is there now a general consensus of where Bitcoin is going?

[dacoinminster]

I've been wondering when someone would write this. Is there now a general consensus of where Bitcoin is going?

That's what I'm trying to build!

I'm off now to celebrate my birthday and the publication of this paper, and I'll be offline for a good long time. I'll be back to answer any questions, but maybe not for a few days.

[EndTheBanks]

I think it's a non-question: I say we have numerous developers compete for the top.

[a63ntsm1th]

Thanks for all the hard work! I can understand the amount of thought and effort that went into this. Out of respect I did spend some time and thought on this post. I only offer critique in hopes that it will help you achieve the success you are seeking.

Let me start off by saying flat out: MasterCoins wont work.

Here are a few reasons why.

Will fix the two biggest barriers to widespread bitcoin adoption: instability and insecurity.

I fail to see those as being the primary barriers to widespread adoption. This is subjective unless there is evidence to this effect. This flaw also results in a greater error:  Solving instability by manipulating markets, and solving insecurity by centralizing control (see below) as this will only increase instability and insecurity in the long run.

The concept of a “trusted entity” is needed for initial distribution of MasterCoins and initial protocol
software development. This entity:
• Should have a publicly known identity and location.
• Should devote the funds received to protocol software development, marketing, and business
   expenses. Funds could also be used for legal costs if necessary.
...

All of the above stipulations (there are seven) also rule out any privately owned company.  No company is going to let you into their operations and into their books.  Is the bitcoin community going to ask them to move to a different county? That leaves only volunteer type organizations, like charities or non-profits. These organizes could serve this purpose but if you think things aren't progressing as you want now, wait till NGO or NP politics and bureaucrats get a hold of it.

The value of bitcoins and MasterCoins must be manipulated to support two goals:
1. In order to ensure sufficient hashing power, Bitcoins must gain value at the same time that
MasterCoins gain value.
2. In order to reward early MasterCoin adopters, Bitcoin values must not be forced up as quickly as
MasterCoin values are rising.
To accomplish these two goals, a minimum bitcoin value and maximum MasterCoin value will be set ...

If the entire system depends on market manipulation, I would say from the very start this system is unsustainable.  Manipulated markets always eventually "buck" the manipulators.
Surely it will succeed in some instances but ultimately it will fail. There is no guarantee that destroying the bitcoins would increase their value, the best you can hope for is that the signal you send in saying "we are destryong bitcoins now to support the bitcoin market" actually effects the market. In fact in the example of destroying bitcoin in the manipulation of Mastercoin prices, actually destroying the bitcoins is impossible . Sending them to some address that apparently isnt accessible doesnt destroy them.

Similarily the stability mechanism (page 10) is also flawed as it explicitly relies on market manipulation.  Take the goldshares example. You cannot increase the value of shares by destroying them.  Destroying them means you have them to destroy them.  If you have them in the first place that means they arent in the market which means destroying them will do nothing to the market. The only thing you can hope to achieve again is that the signal that you are destroying shares will affect the market.  Are the shares going to be bought then destroyed? If so, bought with what? And who suffers the losses from the destruction?

As I see it, what MasterCoins essentially does is, using the existing bitcoin network, buy up bitcoins using a centrally-controlled, non-democratic, closed and non-transparent currency. Then attempts to manimupate and regulate the bitcoin market, the Mastercoin market, and all user currency markets. Wow, thats gonna take a lot of money.

Who would ever trade their bitcoin for MasterCoin given this?

Now admittedly I may be wrong, it's happened a couple of time before. So let me offer some suggestions.

First the idea of adding additional data into the blockchain is probably good and as far as I know, very easy to do.

Therefore I think you should drop the idea of a trusted entity, drop the idea of price manipulations, and promote the concept of useing mastercoin as a way to add more data to transactions to give the features you mentioned to bitcoin itself.

Other features require third parties.  If there is profit to be made in offering these services then people will provide them.

Dont take this critique personally, it is better to be proven wrong then to waste your efforts in vain. I appreciate anyone who proves me wrong for that begins the process of enlightenment.

[majamalu]

(...)

Dont take this critique personally, it is better to be proven wrong then to waste your efforts in vain. I appreciate anyone who proves me wrong for that begins the process of enlightenment.

It's nice to read comments like this from time to time. Also you're right.

[BTConomist]

I have spent the last few months writing and editing a document which I am ambitiously calling "The Second Bitcoin Whitepaper".

Today is my birthday, so as promised, I took the day off work to do some final polishing and to publish it for public comment.

Here it is: https://sites.google.com/site/2ndbtcwpaper/2ndBitcoinWhitepaper.pdf

The paper calls for a "trusted entity" to hold funds, hire developers, and probably make a lot of money for themselves. (Read more about it in the whitepaper.) The most important feedback I need from the bitcoin community is who that entity should be.

What company, person, or group of people do you consider most trustworthy to play this role?

I will be online for a couple more hours to answer questions about the paper, then I'll be off to celebrate my birthday and finally publishing this.

First of, Happy Birthday! Second, what an elaborate piece of work you've concocted.

I remember reading about your idea way back when BTC was trading above $14. However, I never understood why the need for such complex system when the bitcoin network already provides everything that you would need to assign a different value to each bitcoin mined (or just to a tiny fraction of each bitcoin). Unfortunately, I still haven't figured out how to put my vision into words that would crush the dreams of even the most audacious of BTC speculators. Perhaps you wouldn't mind helping me solidify that vision in what can be called "The Third Bitcoin Whitepaper" one day?

Basically, I don't see raw bitcoins (those traded on Mt.Gox, etc) to be worth more than the cost of their production + maybe some profit margin that reflects a level of competition among the miners. But once those raw bitcoins are used in transactions for something of value (e.g. an hour of someone's service, an ounce of gold, a product, etc), their value can grow or shrink from the value of those transactions. So, if you are up for a simpler way to build "new currency layers" within the bitcoin network (rather than on top of it, as proposed in your paper), then we should talk.

[BTConomist]

First the idea of adding additional data into the blockchain is probably good and as far as I know, very easy to do.

Therefore I think you should drop the idea of a trusted entity, drop the idea of price manipulations, and promote the concept of useing mastercoin as a way to add more data to transactions to give them the features you mentioned to bitcoin itself.

We can refer to that data as bitcoin annotations, or 'bitnotations' for short.
I just love how many similarities there are between a tweet and a bitcoin transaction.

[gregwtmtno]

Looks great. You clearly put a ton of work into it.

[BitcoinPorn]

Just as cool of a name as SolidCoin.

[a63ntsm1th]

First the idea of adding additional data into the blockchain is probably good and as far as I know, very easy to do.

Therefore I think you should drop the idea of a trusted entity, drop the idea of price manipulations, and promote the concept of useing mastercoin as a way to add more data to transactions to give them the features you mentioned to bitcoin itself.

We can refer to that data as bitcoin annotations, or 'bitnotations' for short.
I just love how many similarities there are between a tweet and a bitcoin transaction.

I think its an amazing idea to but other data into bitcoin transactions.  It opens up a whole realm of possibilities, including placing other types of transactions in them.  Insofar as I was very critical of the authors work, I should have spend more time pointing out the great ideas for putting other currencies on top of bitcoin.  We do it all the time in national currencies.  Gift cards, coupons, vouchers, prepaid cards etc.

@dacoinminster please continue your courageous work.  You are a leader and an honest person, much respect.

[LudwigDG]

The paper is nicely written. I will keep this as a reminder for the potential of bitcoin.

[tvbcof]

Happy Birthday.

I'll critique your paper and contrast it with my own thoughts on similar matters.  While from a mile high view some of the solutions I envision have some similarities, I have some rather diametrically opposite views on a lot things.  I may someday produce a contrasting whitepaper, but don't hold your breath.  Also, forgive me in advance for any lack of tact, and everything I say should be prefaced by 'in my opinion'.

1)  I do think that it is almost unconscionably presumptuous to title the work 'The Second Bitcoin Whitepaper' given the nature of the content.

2)  I find one of the biggest threats to Bitcoin's long-term viability is that the blockchain will be bloated with spam (or more accurately just small transactions.)  Your solution perpetuates that issue from what I can tell.

3)  I believe that the most viable design philosophy is one where it is assumed that all parties are interested only in maximizing their own gain and will do so at the expense of all other considerations.  Good engineering practice would be

  3a)  to ensure that there exists no chinks which can be exploited by any party which create more harm to the system than the attacker suffers himself.
  3b)  to harness this force and leverage it to benefit the system.

4)  A currency system which is to live along side a state sponsored complement should anticipate state sponsored attack.  Probably the best strategy would be to outwardly ignore any state level legal services while considering internally how to mitigate potential avenues of attack.  The last thing it should do would be to rely on any form of legal protection from any state.

5)  Any form of centralized control should be avoided.  Minor centralized development decisions are probably unavoidable, but there is a great deal of experience to turn to in the long history of open source endeavors for resolving disputes

3,4,5 R)  Your 'Trust Entity' structure, although vaguely defined, seems to violate all of these concepts (except arguably #4 as I re-read things.)  Similarly, your Appendix B on Moral Issues.

6)  Between the complexities of initial distribution, ongoing reward, and hopefulness of fairly astronomical wealth generation, things 'feel' a bit scammy.  Whether the intent is there or not, I would expect that things would devolve to that characterization for a variety of reasons...or at least become fairly dysfunctional when more than a handful of people are involved.

7)  Most of the child currency features and protections you mention do not seem to require a 'MasterCoin' construct (though the 'distributed exchange' probably would and is a nice feature.)

  I felt a visceral abhorrence at the thought of destroying Bitcoin.  I suspect that it would take a lot to make that fly, and getting over the initial adoption issues necessary to make it fly seems unlikely.

8.5)  Trying to range-bind Bitcoin and (something like) MasterCoin by manipulating the supply of Bitcoin seems like a moonshot given that nobody has a crystal ball, and would likely produce to few degrees of freedom anyway.

[casascius]

1)  I do think that it is almost unconscionably presumptuous to title the work 'The Second Bitcoin Whitepaper' given the nature of the content.

I think I agree with this statement and I think "unconscionably presumptuous" is a perfect way to put it.  I would like to kindly ask you to change the title of the thread.

I also don't think I agree with the assumption that the biggest barriers to adoption are instability and insecurity and therefore a series of child currencies is the answer.  Child currencies seem more like they would answer scalability problems that have not yet even been taken seriously by the development community, let alone by the public at large.

The child currencies seem like a non-starter, because if you have currency A, and want to shop at a store that takes currency H, you need to engage the services of an intermediary for no clear benefit.  If a store decided to take all the currencies just to adapt, then suddenly there's a mountain of unneeded complexity, as if Bitcoin isn't already complex enough - and the smorgasbord of currencies yields no useful effect.

I believe that the biggest barrier to adoption is simply that people just don't know what the hell Bitcoin is, how it works, how to get their hands on it, and requires understanding of a lot of new concepts just to be comfortable with.  If they could go on their E-Trade or their Schwab account, and type "BTC" and click "Buy", and "wire" (send) them out of their account to a Bitcoin address, things would be a whole lot different.  Since Bitcoin is a wild frontier right now, built on concepts the media and our governments barely understand, only the geekiest among us can see through whatever the media says and realize the value on the merits alone.  If the media says it's going downhill or to the moon, that's what people will believe.

I'm more inclined to say that the creation of normal banks - as they are understood by the public at large - that offer the same kind of banking services that the public at large expects out of a bank - would be the answer to both the scalability issues and the learning curve.  If you could walk into a branch - or click on a signup process - with an institution where there were some sort of formal auditing and accountability in place, it would be a whole different story.  That's admittedly less possible, as all of the banking shenanigans that help banks be magically profitable are much more difficult when they have to deal with real units of account that can be fully audited and accounted for by anyone.

The child currencies would be totally unnecessary, because if you bank at bank A, and want to shop at a store that banks with H, a simple handshake between the two to ensure the transaction - denominated in BTC - settles off the blockchain - is all that would be needed.

[Quantus]

No doubt your a very smart person. But most people show a very strong hostility to bitcoins simple because they don't understand it.
This "white paper" of yours would just add 20 more layers of shit on top of the already convoluted system that Bitcoin appears to be.

[dogisland]

Confession - I skimmed the PDF.

Is it fair to say the problems you are trying to fix are instability and insecurity and by that you mean.

Instability - price volatility ?
Insecurity - Counterparty risk ?

I think you should really spell out what you're trying to fix and articulate how you think you've fixed it.

[bitfreak!]

Therefore I think you should drop the idea of a trusted entity, drop the idea of price manipulations, and promote the concept of useing mastercoin as a way to add more data to transactions to give the features you mentioned to bitcoin itself.

+1

[ThePiachu]

From what I understand, you want to allow users to create their own currencies over the Bitcoin network and then be able to exchange them easily. I remember a similar proposal of Digital Coin - http://digitalcoin.info/ , but requiring a lot less hassle and probably being what one needs:

-Anyone can create any amount of their own currency that can be destroyed (as in, not Bitcoins or other cryptocoins)
-That person is responsible for backing up its value in their goods or services
-The market determines the value of each currency
-Value of currency is measured in a currency that cannot be destroyed - Digital Coin (for example Bitcoins)
-Anyone can use any currency they want for payment if both parties agree, if not, they settle it in Digital Coins

So for example Coke could issue Coke$ that you can use to pay for anything, and when you come to Coke, they will exchange it for a fixed amount of coke.

That is the idea in a nutshell. Is there anything more that the "MasterCoin" does that can't be done with Bitcoins and the Ditital Coin concept?

[BitcoinPorn]

Is there anything more that the "MasterCoin" does that can't be done with Bitcoins and the Ditital Coin concept?

When I read the paper quickly, from my gathering of it, it seems the "MasterCoin" concept is something that in theory was probably intended to be another alternative coin that was stand alone, but since the introduction of all these other digital currencies has shown that people, despite if they like technical changes made to other coins, will stick with Bitcoin based on trust and other things.   So instead of making another coin, attempt to force more features on top of the Bitcoin client itself, require the Bitcoin client to run, but have enough changes where it seems a whole other coin is created without creating another coin.   I'm sure I have it wrong, but I actually don't think I do.


Also, this should not have been called the second whitepaper, takes away from looking at it too seriously.  That its a title reserved for something Gavin could blog about one day.