James Retard

[ParsnipCommander]

Hey guys

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[LagerFan]

I read it as C) the currency dies in its current form but the algorithm/concept lives on in the form of other alts - not necessarily in existence yet.

[ParsnipCommander]

I read it as C) the currency dies in its current form but the algorithm/concept lives on in the form of other alts - not necessarily in existence yet.

So C) also means you lose your investment 

[cbeast]

I read it as C) the currency dies in its current form but the algorithm/concept lives on in the form of other alts - not necessarily in existence yet.

So C) also means you lose your investment 

He's talking about colored coins that only use bitcoin micro-transactions to secure them. For instance, if a bitAmero were created, it might only cost one Satoshi to generate, but be worth thousands of times more. To spend them, you would still need a Bitcoin client. What it does to the price of Bitcoin itself is anyone's guess.

[Peter R]

He's talking about colored coins that only use bitcoin micro-transactions to secure them. For instance, if a bitAmero were created, it might only cost one Satoshi to generate, but be worth thousands of times more. To spend them, you would still need a Bitcoin client. What it does to the price of Bitcoin itself is anyone's guess.

I hadn't given coloured coins much thought till just now.  I suppose a coloured coin is a sort of a bearer bond, kind of an IOU payable by some third-party upon demand.  A regular bitcoin has a value equal to its trading value, while a coloured coin has a value equal to its bitcoin value + the market value of the implied IOU.  

It seems that coloured coins could be used to create decentralized exchanges (emulate the only useful feature of ripple while avoiding all the ripple trolls  ).  BitStamp, BTC-e, BTCChina, Kraken, etc could all create "coloured USD".  We'd have StampBucks, BTCeBucks, etc.  We could probably trade StampBucks for regular coins in a decentralized and trustless way using coinjoin¹ transactions.  In fact, StampBucks could trade directly against BTCeBucks and deviations away from 1:1 may be indicative of solvency problems.  This would eliminate all counter-party risk against the BTC side of your trade and this would allow you to trade with anyone in a peer-to-peer fashion.  Your only risk when using the decentralized trading system is the credit worthiness of the issuers of the coloured coins.  

The exchanges then simply become "gateways" in the Ripple sense.  I may deposit a 0.1 BTC coloured coin at BitStamp that had an implied IOU value of $5,000 USD.  The exchange would give me back a regular 0.1 BTC and then perhaps wire my personal bank account $5,000 upon my instructions.  
 
So this is bitcoin + ripple but entirely within bitcoin and without counter-party risk against bitcoin assets (unlike ripple where bitcoin assets are IOUs).  


¹We'd need a higher-level accounting system to control and track which output the "colour" of the coin follows, but upon first glance I think this is all doable.



EDIT: this might make 3rd party audits of the exchange/gateway easier too.  The auditor can inspect to the blockchain to determine the number of outstanding StampBucks, for instance.  All it needs to do is verify that the exchange/gateway actually has this much US dollars in reserve.  I think it becomes difficult to hide the amount of IOUs issued...

[cbeast]

He's talking about colored coins that only use bitcoin micro-transactions to secure them. For instance, if a bitAmero were created, it might only cost one Satoshi to generate, but be worth thousands of times more. To spend them, you would still need a Bitcoin client. What it does to the price of Bitcoin itself is anyone's guess.

I hadn't given coloured coins much thought till just now.  I suppose a coloured coin is a sort of a bearer bond, kind of an IOU payable by some third-party upon demand.  A regular bitcoin has a value equal to its trading value, while a coloured coin has a value equal to its bitcoin value + the market value of the implied IOU.  

It seems that coloured coins could be used to create decentralized exchanges (emulate the only useful feature of ripple while avoiding all the ripple trolls  ).  BitStamp, BTC-e, BTCChina, Kraken, etc could all create "coloured USD".  We'd have StampBucks, BTCeBucks, etc.  We could probably trade StampBucks for regular coins in a decentralized and trustless way using coinjoin¹ transactions.  In fact, StampBucks could trade directly against BTCeBucks and deviations away from 1:1 may be indicative of solvency problems.  This would eliminate all counter-party risk against the BTC side of your trade and this would allow you to trade with anyone in a peer-to-peer fashion.  Your only risk when using the decentralized trading system is the credit worthiness of the issuers of the coloured coins.  

The exchanges then simply become "gateways" in the Ripple sense.  I may deposit a 0.1 BTC coloured coin at BitStamp that had an implied IOU value of $5,000 USD.  The exchange would give me back a regular 0.1 BTC and then perhaps wire my personal bank account $5,000 upon my instructions.  
 
So this is bitcoin + ripple but entirely within bitcoin and without counter-party risk against bitcoin assets (unlike ripple where bitcoin assets are IOUs).  


¹We'd need a higher-level accounting system to control and track which output the "colour" of the coin follows, but upon first glance I think this is all doable.



EDIT: this might make 3rd party audits of the exchange/gateway easier too.  The auditor can inspect to the blockchain to determine the number of outstanding StampBucks, for instance.  All it needs to do is verify that the exchange/gateway actually has this much US dollars in reserve.  I think it becomes difficult to hide the amount of IOUs issued...

Those are only a small start to what can be created by coloring coins. While they do incur counterparty risk, they also make any financial instrument and contract available online with maximum security. Colored coins can create decentralized stock exchanges, derivatives, rental agreements, leases, or almost anything you can think of.

[cbeast]

We'd need a higher-level accounting system to control and track which output the "colour" of the coin follows, but upon first glance I think this is all doable.

There are color enabled clients that read the metadata and trace the coins automatically. They still need a lot more development.

[Peter R]

We'd need a higher-level accounting system to control and track which output the "colour" of the coin follows, but upon first glance I think this is all doable.

There are color enabled clients that read the metadata and trace the coins automatically. They still need a lot more development.

Yes, this all seems quite exciting and promising to me. 

[freequant]

I read it as C) the currency dies in its current form but the algorithm/concept lives on in the form of other alts - not necessarily in existence yet.

So C) also means you lose your investment 

Unless you diversify.
Crypto as a sector has a bright future, but time plays against Bitcoin.

[Brangdon]

Question:If the scenario plays out, does that mean that A) the price of Bitcoin plummets, but the miners are going to do something else? Or B) does that mean that nobody uses Bitcoin as currency but the price skyrockets because of the technological potential of the network being used for other things?

I don't see much logic behind his statements. He mentions not trusting Bitcoin because it is too young to have seen a full boom/bust business cycle. If that's how he feels, he'll have to wait another 10 or 20 years before jumping on any related technology.

If the price of Bitcoin plummets, then the real-world value of the block reward and transaction fees paid to miners also plummets, and some of them will find it is no longer economical to mine. As they drop out, profits to the remainder rise, so there will always be someone mining, but the network will be less secure. Mounting a 51% attack will become cheap. Because of this, the block-chain won't be usable to secure anything of value. So it becomes useless for coloured coins and the like.

Coloured coins won't create demand for bitcoins, because they generally only need a few satoshi to do their job. Hence they won't cause the price to skyrocket.

So he may mean (A), but that isn't really what he actually says. A lot of people see the flaws in Bitcoin, and conclude that it will fail and that some other altcoin will win, but I think they are mostly basing that on gut feel. It's a hard proposition to disprove, and it makes a good sound-bite, but that doesn't make it right.

At the moment it seems to me that the first mover advantage of Bitcoin, and the resulting network effects, make it almost impossible for another altcoin to beat. The only potential killer flaw in Bitcoin is the escalating costs of the proof of work mechanism, and therefore the only technology that has a chance of beating it is proof-of-stake, and I'm not yet convinced that PoS even works. Other features, like the choice of hashing algorithm, or the block time, or the transaction scripts not being Turing-complete - none of these seem like fatal flaws. Some economists argue that deflation is bad, and they may be right, but a kind of reverse Gresham's Law applies and Bitcoin will succeed even if the economy would be better off without it. So we're left with his vague unease about Bitcoin being 5 years old and not 25.

[cbeast]

Coloured coins won't create demand for bitcoins, because they generally only need a few satoshi to do their job. Hence they won't cause the price to skyrocket.

There's no way to know this. In the fullness of time, colored coins may be used for everything from rent agreements, air miles, stock trades, to backing every fiat currency on the planet. Bitcoin would still have to skyrocket and crash, but overall climb rapidly.

[Alonzo Ewing]

One thing you gotta remember about Rickards is that he has no earthly idea about Bitcoin.  I say that as a fan of Rickards.  I like his thoughts on the global monetary system.  But he's been steeped inside the system so long that he can't see anything outside of it.  Check out this video:

http://www.bloomberg.com/video/malka-rickards-debate-bitcoin-utility-longevity-662IxXXTQl2e~49s0UZNhw.html

Look at all of the fallacies he talks about.  So take his opinions with a grain or spoonful of salt.

Remember, if the currency fails, miners have no incentive to mine, and the hashrate falls.  The protocol cannot be secured.  If the currency fails, everything about Bitcoin fails.  Rickards doesn't know what he's talking about.