rpietila Altcoin Observer

[Cryddit]

That's absolutely the case.  In fact, someone could probably make a good Ph.D thesis out of trying to create a model that identifies the "lower minima" in cultural/economic space. 

It's relevant to this discussion in terms of whether the world does or does not need a "global ledger." 

I think that a global ledger is an inevitable (and beneficial!) part of an eventual world society. 

When I think of all the crimes and losses that have been caused by misrepresenting financial information, and all the damage to society it has caused, it's heartbreaking.  And then I think of the possibility that there could one day be a "global ledger" where any such claim could be proved by producing a cryptographic key, and that the failure to do so should amount to abandoning the claim.  And I say hell yes.

Bernie Madoff says "I'm making 20% a year on investments!"  Possible investors, if they've learned nothing else, have learned enough to say "sure, show me the key." 

Jim Leeson says "I'm making risk-free investments and earning 18% in the Asian Markets, with no oversight!"  Barents Bank, even if they have been such idiots as to let him operate with no oversight, shouldn't be such idiots as to NOT say, "sure, show us the key."

Altcoin developers say "No, we're not dumping our premine on the market."  Altcoin holders already go look and say, "uhh, the blockchain monitor says you're spending it on something...."  And if the ledger were a global ledger they could go right on and say, " ... and if it's not going to the exchange, then you should be able to give us a key that demonstrates it isn't."  But alas, the ledger is not global, so nobody can tell what they're spending the premine on.

I look at a truly global ledger as at least having the potential to make a decent start on ending financial fraud, and I think that's a good thing.

But that's a "global" value, in that I regard the financial markets as being properly an open record.  Obviously the powerful or rich can spy on everybody's finances now, easily, pervasively, and routinely, no matter what we do.  So privacy as we have known it is effectively over, and now we're falling back on another principle which is equal access.  So by this new standard, obviously any attempt to prevent the poor from having the same power must be seen as an argument in favor of tyranny.  Welcome to the age of aquarium.  If we can't have privacy from everybody, then at least we shouldn't allow a select few to unfairly hog the information all to themselves. 

The "traditional" view of such things -- from back when people actually could somehow keep their financial records private and it required actual human effort and personal risk to discover them -- was that such effort was usually applied only by inimical forces and would-be tyrants, and has therefore a very different model of right and wrong w/r/t privacy over individual financial records.

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[r0ach]

Obviously the powerful or rich can spy on everybody's finances now, easily, pervasively, and routinely, no matter what we do.  So privacy as we have known it is effectively over

I think anonymous currency will eventually lead to the collapse or crippling of the state.  People will just hide their money and they'll be unable to finance the bureaucracy/control grid that gives them the power to do things like that.  So on one hand, the "global ledger" is a severe globalization and possible enslavement tool, but then anonymous currency counter balances that aspect, or possibly overruns it entirely.

Anonymous currency = Atlas Shrugged

[stylin]

The "traditional" view of such things -- from back when people actually could somehow keep their financial records private and it required actual human effort and personal risk to discover them -- was that such effort was usually applied only by inimical forces and would-be tyrants, and has therefore a very different model of right and wrong w/r/t privacy over individual financial records.

It seems to me that the notion of privacy will soon become obsolete. Privacy was really only maintainable as long as humans didn't have the technology for large scale data mining... but as our technology improves privacy will inevitably go extinct. At some point in the future you'll be able to buy a little mini-drone and fly it all over the place taking pictures. Your phone will have an infrared camera so you can see through walls, watch people having sex. In the far future privacy will no longer exist, government or no government.

I don't understand why some people cling onto privacy as some golden ideal that we should all maintain. It's just another element of natural living that's been destroyed by civilization.

It'll be interesting to see if we can reverse the tide from programming standpoint. My guess is that mainstream society will not care enough, however privacy will remain as a niche among those who are passionate about it.

[Its About Sharing]

Obviously the powerful or rich can spy on everybody's finances now, easily, pervasively, and routinely, no matter what we do.  So privacy as we have known it is effectively over

I think anonymous currency will eventually lead to the collapse or crippling of the state.  People will just hide their money and they'll be unable to finance the bureaucracy/control grid that gives them the power to do things like that.  So on one hand, the "global ledger" is a severe globalization and possible enslavement tool, but then anonymous currency counter balances that aspect, or possibly overruns it entirely.

Anonymous currency = Atlas Shrugged

I think the state is doing a great job of collapsing itself.
I think a bigger cause of the demise of the state, will be a blockchain backed decision making process, making the states secretive and corrupt nature finished. And with that the corruption, wars, etc.

Related will be what technologies like nxt and etherium will do to "business".

I'm not sure of the importance of an anonymous btc. Don't think we even need a separate anonymous currency, but I think regulators may lead to one.

The event horizon here, I think, is more than we can imagine....

[Cryddit]

Don't be silly.

Anonymous currency is fine for buying a dirty magazine and some hand lotion.  

But as the amounts grow larger, the risks aren't worth it.  If Alice has financial dealings with Bob but genuinely doesn't know and cannot discover who Bob is, then Bob will occasionally rip off Alice secure in the knowledge that nothing can be proven.  As this happens more often, Alice will learn to refuse to do business anonymously.  Once you're talking about value that is worth the effort to rip off, you're talking about a negative value proposition for 'hard' financial anonymity.  

What Alice wants, for her own safety, is to be able to later prove that she did make a payment to Bob.  If she can't prove that, she has no legal avenues for recovery if Bob rips her off and, after a few hard knocks like investing in altcoins, she'll learn to refuse to do the deal at all.  If she can prove that, then Bob isn't going to be able to keep his financial records private without Alice's cooperation.  So his financial privacy is 'soft' rather than 'hard'.  

Likewise, Bob, who did receive a payment, wants to be able to prove he delivered or performed   the goods or services he offered for sale; if he can't prove that, then he has no legal avenues for defense if Alice claims she paid him and got ripped off.  If he can prove that, then Alice cannot keep the financials private without Bob's cooperation.  So her financial privacy, like Bob's, has to be 'soft' rather than 'hard'.  

People buying a dirty magazine and some hand lotion want financial privacy, and that's fine.  Although the embarrassment they now suffer will fade away as the open ledger makes it clear how utterly normal such purchases really are.  

But once they're into transactions big enough that they're afraid of getting ripped off?  Then they want to be dealing in assets that the police can trace and the courts can recover.  And if no cryptocurrency gives them that option, then no cryptocurrency will ever be accepted for mainstream use in purchases larger than a pizza.

[dewdeded]

How can you say such things? Cash is mainstream.

Liberty Reserve was 100% anon and maximum privacy (e.g. allowing privat payments: hiding the sender) and worked GREAT, until US govt killed it.
It had over 1.000.000 users from ALL over the world, more then 140 countrys. It was mainstream/short before mainstream.

[Cryddit]

How can you say such things? Cash is mainstream.

When you're buying things the size of a pizza it's mainstream.  And with a pizza there're witnesses who know where it was delivered and know that the payment was received.  (Starting with the delivery driver or the waiter.)

Walk into some car dealership with a suitcase full of cash and try to buy a car without ever showing any ID, and, witnesses or not, you'll see exactly how reasonable people think anonymous transactions for significant amounts really are.

[Keyboard-Mash]

How can you say such things? Cash is mainstream.

When you're buying things the size of a pizza it's mainstream.  And with a pizza there're witnesses who know where it was delivered and know that the payment was received.  (Starting with the delivery driver or the waiter.)

Walk into some car dealership with a suitcase full of cash and try to buy a car without ever showing any ID, and, witnesses or not, you'll see exactly how reasonable people think anonymous transactions for significant amounts really are.

That's adorable. Imagine running a multi-million dollar business and having all of your competitors see all of your financial transactions. Good luck getting them on board with that one.

"Why did you give "x" a discount and not us?"
"I noticed you did lots of business with 'x', so we bought them out, good luck!"
"Why does 'x' get paid a higher salary than me? Can you give me a raise?"
"Hello sir I see you're doing business with your long time private partner, allow me to offer you the same service for a 10% discount"
"I see you're taking bids for 'x' project, and now I can see the prices that have been submitted .. let me put in a discount"
...along with hundreds of other problems.

Just not how business is done man. They're not gonna buy into it, because it'll turn normally reasonable people into rats. I can see it sustaining consumerism at best.

But by all means, enjoy the one-man shops and desperate consumers .. anon/private tx's will be inviting the real money. You still have the ability to track transactions with even CryptoNote. I'd like to not devolve this thread into anon vs non-anon though .. it's speculative at best.

[Cryddit]

In the first place, those things - those fears - are exactly the sort of thing I'm talking about when I say that values will have to change before a global ledger is *seen* to be a good thing for everyone.  Another way to view all of those situations is,

"Oh, your business model is based on deception and keeping others ignorant?  Here, asshole, let me fix that for you."

'Cause, seriously.  If you're getting away with paying people less than they're worth, specifically by trying to keep them ignorant of what they're worth - doesn't that make you an asshole? 

If someone is getting business when you can make a profitable offer at a ten percent discount under that price - then that person doesn't deserve the business does he?  He's running an ineffective operation. 

If you're giving X a discount for some legitimate business reasons, then doesn't Y have a right to be upset if it can offer the same business reasons but not get the same discount?  Or at the very least if Y can offer the same service, wouldn't it be the right thing for them to be looking for someone willing to give them that discount?

All I see here with the open ledger is more efficient honest business.  People who find that threatening are just conditioned to using less than complete honesty in order to make a profit at an inefficient business. 

[Peter R]

Don't be silly.

Anonymous currency is fine for buying a dirty magazine and some hand lotion.  

But as the amounts grow larger, the risks aren't worth it.  If Alice has financial dealings with Bob but genuinely doesn't know and cannot discover who Bob is, then Bob will occasionally rip off Alice secure in the knowledge that nothing can be proven.  As this happens more often, Alice will learn to refuse to do business anonymously.  Once you're talking about value that is worth the effort to rip off, you're talking about a negative value proposition for 'hard' financial anonymity.  

What Alice wants, for her own safety, is to be able to later prove that she did make a payment to Bob.  If she can't prove that, she has no legal avenues for recovery if Bob rips her off and, after a few hard knocks like investing in altcoins, she'll learn to refuse to do the deal at all.  If she can prove that, then Bob isn't going to be able to keep his financial records private without Alice's cooperation.  So his financial privacy is 'soft' rather than 'hard'.  

Likewise, Bob, who did receive a payment, wants to be able to prove he delivered or performed   the goods or services he offered for sale; if he can't prove that, then he has no legal avenues for defense if Alice claims she paid him and got ripped off.  If he can prove that, then Alice cannot keep the financials private without Bob's cooperation.  So her financial privacy, like Bob's, has to be 'soft' rather than 'hard'.  

People buying a dirty magazine and some hand lotion want financial privacy, and that's fine.  Although the embarrassment they now suffer will fade away as the open ledger makes it clear how utterly normal such purchases really are.  

But once they're into transactions big enough that they're afraid of getting ripped off?  Then they want to be dealing in assets that the police can trace and the courts can recover.  And if no cryptocurrency gives them that option, then no cryptocurrency will ever be accepted for mainstream use in purchases larger than a pizza.

+1

The cries for protocol-enforced anonymity seem dubious to me.  You explained why very clearly. 

Bitcoin, with techniques like coinjoin and hierarchal deterministic address chains, allows for privacy but without requiring it.

[Cryddit]

In the second place, 'soft' anonymity is not 'no' anonymity.

I accept that Alice and Bob are not going to do business in the real world without knowing who each other are.  Not for any serious, major amounts of money.

That means Alice cannot keep her financial dealings with Bob private without Bob's cooperation, and Bob, likewise, cannot keep his transactions with Alice private without Alice's cooperation.

As long as they cooperate - as long as neither of them releases the key they can use to prove something - then they have privacy.  

That extends to privacy by mutual consent, but it doesn't extend to ripping someone off with impunity.

It doesn't mean someone can look into your ledger and know exactly what you're doing with a third party, without that third party's cooperation.  That's a completely open ledger with no option for even 'soft' privacy, and that would be a *VERY* radical departure.  

In designing an ideal for an open ledger, 'soft' privacy would be my goal.  In fact, even that much should be optional.  If people really want to get scammed and ripped off with 'hard' anonymity, they have that right.  

And if they want to do without even 'soft' anonymity, they should be able to just publish their damn keyring and then sit back and let everybody who can actually offer them better deals than they're getting, come straight to them without wasting their time and resources on the sounding-out processes we now pay sales staff fifty percent of the produced value to carry out.

The point is, I believe people (and businesses) don't want hard privacy.  Until they have enough experience to learn exactly how much they can save on cost-of-sales expenses, they won't want the completely open book either.  Hell, if the salesmen get to make the decision, they'll NEVER want the open book, because it means they'll be unemployed.  But at least in the short run, they just want protection from scammers, so they want 'soft' privacy rather than 'hard.'  They want to be dealing in things that police can trace and courts can recover.

[Peter R]

Three brilliant posts in a row, Cryddit.  

I think you just killed the entire "protocol-enforced privacy" alt-coin sector.

[Adrian-x]

Three brilliant posts in a row, Cryddit.  

I think you just killed the entire "protocol-enforced privacy" alt-coin sector.

James D'Angelo also makes a great case for full transparency in business. I think this could be revolutionary.   
https://www.youtube.com/watch?v=gC4j-V585Ug

[Cryddit]

Wow.  

I thought it was just me who'd been having these thoughts about radical open-ledger business and cutting out the corruption.   I'm glad to see someone else going there.

The fact is our current business models are highly inefficient.  We sacrifice up to 50% of the value we produce in virtually every level of marketing.  We'll always need marketing that deep for consumer products, because that's all about exploiting bugs in human neurology; but when we're talking about B2B stuff, it really is a nearly complete waste.  Entire organizations of people are paid millions of dollars to convince three or four other individuals a year to make particular decisions - which those people could make correctly, easily and without their "help," if they just had the financials open in front of them.  

We sacrifice another 10% or thereabouts of total production, just in the premium we pay CEOs and other upper management for having personal connections.  If decisions were made mainly on the basis of (open) information rather than personal connections, the CEO would have influence only in terms of actual  financial judgement talent, and paying for personal connections would be a misallocation.  

We sacrifice actual talent and hard work by promoting well-connected brown-nosers over people who could run the company better.  If the books were open so you could see what kind of results are attributable to whom, you couldn't ever justify that decision to the stockholders.  

Much of the money given by businesses to politicians could be saved for business purposes if the ledgers were open.  Of course that won't be a popular idea with most politicians, but I can imagine some stockholders going for it.

We sacrifice yet more money paying armies of accountants to demonstrate that we haven't been breaking the rules - when anyone ought to be able to demonstrate that instantly, automatically, and without cost, at any time.

And then there's the corruption issue D'Angelo brings up.  Depending on where you're doing business, corruption is not just the norm, it's the dominant form of the whole damned economy.  The thing all of those places have in common is that corruption prevents the domestic economies from producing any significant value.  My God, can you imagine how wealthy the Russians would be if they got out from under the thumbs of their mobsters?  Open books means no room for thieves to stay secret.  

[drawingthesun]

I'm on my phone and can't write too much.

I sort of see what some of you are saying but at the same time I think you're missing the potential importance of a crypto currency that isn't based around maintaining a clean open ledger like bitcoin.

A currency like Monero, without a huge focus on a ledger and with its feature being anonyminity will be useful for millions.

It might not be as useful and accepted as bitcoin, but true anonymous crypto currency transactions will be very useful for a lot of people.

To think that the way the bitcoin crypto currency works will be enough for all humanity is a joke.

Even if an anonymous currency went underground and only was used by criminals, it's value would be on par with the legal, safe open bitcoin.

[Peter R]

I'm on my phone and can't write too much.

I sort of see what some of you are saying but at the same time I think you're missing the potential importance of a crypto currency that isn't based around maintaining a clean open ledger like bitcoin.

A currency like Monero, without a huge focus on a ledger and with its feature being anonyminity will be useful for millions.

It might not be as useful and accepted as bitcoin, but true anonymous crypto currency transactions will be very useful for a lot of people.

To think that the way the bitcoin crypto currency works will be enough for all humanity is a joke.

Even if an anonymous currency went underground and only was used by criminals, it's value would be on par with the legal, safe open bitcoin.

So we should launch a bitcoin spin-off based on cryptonote technology and see what happens

[spiffcow]

I'm all for a pseudonymous open ledger, but at the present cryptocurrencies are used primarily by drug dealers, tax dodgers, libertarian wackos, and high risk traders.  So I'll be betting on Monero

[r0ach]

tax dodgers, libertarian wackos

While I am personally not a tax dodger, there have been plenty of sound cases put forward as all taxes forced by coercion being inherently evil.  Humans were once hunter gatherers, then they began to practice specialization.  That specialization led to abundance, then the parasite class and taxes formed to exploit that, and here we are today.  Paying taxes isn't a patriotic duty, it's you voting towards supporting that particular ideology.

The word libertarian is somewhat based on identifying that system as either a necessary evil, or completely unwanted phenomenon, and minimizing it's effects.  If there's anyone with a logical flaw in their argument, it's probably you.

[xtester]

Glad to see some senior bitcoin holders kindle interesting and substantive discussions on altcoins. Especially thanks to rpietila and Peter R for their insights.

Regarding the The Alt-coin Narrative Cycle, which by the way was a very interesting read, I was wondering, since you disagree bitcoin is a technology which can be de-throned by better technology, on what do you base you belief and what do you think bitcoin is?

Because I don't believe bitcoin is a technology.  Bitcoin contains technology but the $7.3 billion market cap is not a measure of that.  Bitcoin is money, and money is memory.  Money represents a shared agreement between the individuals who voluntarily use it.  Our shared agreement is that spots on The Blockchain represent value and one transfers his value by signing a message with his private key (e.g., in exchange for goods or services).  

Forget about bitcoin the protocol, and even bitcoin the payment network (nodes + miners), and focus on bitcoin as a shared agreement that the distribution of wealth encoded by the blockchain is efficient and legitimate.  If it wasn't efficient, large holders would sell, and small holders would buy.  If it wasn't legitimate, people wouldn't be willing to trade their time in exchange for bitcoins, and bitcoin would have collapsed.  

So the value of money (e.g., bitcoin) primarily comes from the legitimacy of its ledger.  The legitimacy of this ledger increases as more people adopt this form of money, and as time proves that it's not a passing fad.  

Viewed through this lens, it becomes clear that even a superior technology (although I question if one exists) would unlikely de-throne bitcoin the ledger, for the new technology would simple be adopted by the ledger as the new payment system.  

In my mind, the only thing that could dethrone bitcoin would be a more legitimate ledger.  But I don't see how it is possible to create one.    

We are pattern-seeking story-telling animals - Satoshi Nakamoto

While I would acknowledge that bitcoin has a tremendous advantage over any other crypto-currency and will probably continue to do so for some time, it seems your position betray a very dangerous bias which leads directly to the narrative fallacy labyrinth. The problem with your stories is not that they make no sense, on the contrary, they seem to make "too much sense", fitting the narrative pattern in a unnaturally good way. In fact both of your stories(the alt-coin narrative and bitcoin story) neglect taking into account that reality is a bit more complex, counter-intuitive and often times random. Indeed, we have heard a quite interesting explanation as to why, for example, dogecoin took off and while this may be partly true, it may well be the obvious and less important part.¹

Now, it seems to me this may very well apply to the bitcoin story also. Indeed, I've heard some very fascinating explanations as to how bitcoin took off, why the bubbles appeared and how we came to the point where we are today, though recent events² may suggest that even bitcoin may have evolved partly due to some least expected series of events which in turn unleashed some major tipping points and side effects. Rmember markets are more random your narrative seems to emphasize. In fact I think bitcoin may have been more of a black swan than most realize. Even people who believed in bitcoin and made some real predictions which became true, are starting to realize now that while some of their predictions came true, it was so due to a whole other set of reasons than the ones they thought of. As you may know reality is often a lot stranger than fiction.

This being said, I think a more accurate description of the phenomenon happening in the altcoin world at the moment would be a cambrian explosion. As with the evolutionary process, it could well be the case that most of the altcoins starting today will die and only the fittest will survive, while bitcoin will further thrive and develop. Now because of what bitcoin is doing, the fittest altcoins will arguably be able to advance a lot faster than bitcoin did. I am not saying that in the near future bitcoin will be threatened, because even if an obviously more robust ledger and more advanced payment network would appear I suspect up to a certain point its evolution will be near impossible to predict. So when it will come, it will probably be disguised as a black swan, just the way bitcoin once was.

Meanwhile there are some altcoins out there that have not even been fully launched yet, still they already exhibit some very fascinating traits necessary, though for the moment not sufficient, for becoming one of the fittest survivals. Their qualities are most certainly not attracting very much attention in a subculture temporarily driven by cheap scams and more sophisticated pump and dump schemes³. Since they are navigating still very much under the radar they seem harmless making sure to hide some of their most dangerously advantageous qualities until they become obvious, their purpose inexorably determined and impossible to avoid.

But wouldn't this precise chaotic altcoin context make for the most interesting, though silent black swan launch? Don't know, maybe. I guess only time will tell.

Anyway, until then then, I'm surely gonna do some more black swan farming⁴.



References
¹Here is slightly different version of the story.
²Although bitcoin has brought some impressive innovation, developed an expanding ecosystem and an ever increasing growth in adoption rate, it seems some of the major price spikes and bubbles are not a result of the previous mentioned factors. This story may shed some light on some unknown facts which may have unintentionally set in motion complex phenomenon which lead to a great acceleration in bitcoin adoption rate, lots of bitcoin media coverage and increase in bitcoin price.
³ This is a good reminder of how the bitcoin world looked until not too long ago, so before you draw your conclusions think about this for a second.
⁴Here is a brilliant essay explaining what black swan farming is and why people are doing it.

[dewdeded]

I sort of see what some of you are saying but at the same time I think you're missing the potential importance of a crypto currency that isn't based around maintaining a clean open ledger like bitcoin.

A currency like Monero, without a huge focus on a ledger and with its feature being anonyminity will be useful for millions.

This. Drug trade on deep web alone, will make the favoured anon coin > $1.000.000.000 market cap big. Question is which coin is becoming this. Lots of development, lots of projects, lots of different approaches. Exciting times.