rpietila Altcoin Observer

[illodin]

So you expect people just borrowing you coins worth of millions if you promise to pay back?

With a legally binding and notarized contract, of course.

This funny thing happened to me two years ago.

I wanted to buy something non-virtual.  It was pretty expensive.  It has four walls and a roof, and all sorts of nice things like heating and cooling and electricity.  It's often referred to as a "house."

I didn't have enough cash to buy it.  So I went to some people and I asked to borrow hundreds of thousands of fiat dollars.  I offered them a 3.5% annual rate of return -- something comparable to what I discussed above -- and proved to them that I was a pretty good risk and was likely to pay back anything I borrowed.

And you know, the funniest thing happened:  they said yes.

Who'd have thought?

Hundreds of thousands of fiat dollars is not very close to 51% of all dollars that exist, or am I mistaken? And at least where I live, banks don't give the money to you, they transfer it to the seller's account in exchange for a document that the bank will hold which basically means that the bank owns the apartment/house until the loan has been paid back (sorry I don't know the English terms but you get the idea). This guarantees that the money has been spent on the house, and that the value of the house "backs up" the loan.

[dga]

So you expect people just borrowing you coins worth of millions if you promise to pay back?

With a legally binding and notarized contract, of course.

This funny thing happened to me two years ago.

I wanted to buy something non-virtual.  It was pretty expensive.  It has four walls and a roof, and all sorts of nice things like heating and cooling and electricity.  It's often referred to as a "house."

I didn't have enough cash to buy it.  So I went to some people and I asked to borrow hundreds of thousands of fiat dollars.  I offered them a 3.5% annual rate of return -- something comparable to what I discussed above -- and proved to them that I was a pretty good risk and was likely to pay back anything I borrowed.

And you know, the funniest thing happened:  they said yes.

Who'd have thought?

Hundreds of thousands of fiat dollars is not very close to 51% of all dollars that exist, or am I mistaken? And at least where I live, banks don't give the money to you, they transfer it to the seller's account in exchange for a document that the bank will hold which basically means that the bank owns the apartment/house until the loan has been paid back (sorry I don't know the English terms but you get the idea). This guarantees that the money has been spent on the house, and that the value of the house "backs up" the loan.

This is why I provided the example of Soros and the bank of England.  If you adjust for inflation and the GBP/USD exchange rate at the time, he borrowed substantially more than the entire current market capitalization of Bitcoin (which is only about $8b USD now).  Soros borrowed the 2014 equivalent of about $20b USD.

It's very easy to borrow money if you already have a lot of it, particularly for short terms.  And remember, in this case, you don't even need to borrow the money - you're just borrowing one of its capabilities (that of staking and verifying transactions).  And, as AlexGR pointed out, many of the coins in the network are not actively staking.

If the profit margin was 50% and the volume was right, it's naive to believe nobody could borrow a billion or ten to exploit it.  They would.

[Este Nuno]

So you expect people just borrowing you coins worth of millions if you promise to pay back?

With a legally binding and notarized contract, of course.

This funny thing happened to me two years ago.

I wanted to buy something non-virtual.  It was pretty expensive.  It has four walls and a roof, and all sorts of nice things like heating and cooling and electricity.  It's often referred to as a "house."

I didn't have enough cash to buy it.  So I went to some people and I asked to borrow hundreds of thousands of fiat dollars.  I offered them a 3.5% annual rate of return -- something comparable to what I discussed above -- and proved to them that I was a pretty good risk and was likely to pay back anything I borrowed.

And you know, the funniest thing happened:  they said yes.

Who'd have thought?

Hundreds of thousands of fiat dollars is not very close to 51% of all dollars that exist, or am I mistaken? And at least where I live, banks don't give the money to you, they transfer it to the seller's account in exchange for a document that the bank will hold which basically means that the bank owns the apartment/house until the loan has been paid back (sorry I don't know the English terms but you get the idea). This guarantees that the money has been spent on the house, and that the value of the house "backs up" the loan.

This is why I provided the example of Soros and the bank of England.  If you adjust for inflation and the GBP/USD exchange rate at the time, he borrowed substantially more than the entire current market capitalization of Bitcoin (which is only about $8b USD now).  Soros borrowed the 2014 equivalent of about $20b USD.

It's very easy to borrow money if you already have a lot of it, particularly for short terms.  And remember, in this case, you don't even need to borrow the money - you're just borrowing one of its capabilities (that of staking and verifying transactions).  And, as AlexGR pointed out, many of the coins in the network are not actively staking.

If the profit margin was 50% and the volume was right, it's naive to believe nobody could borrow a billion or ten to exploit it.  They would.

But if that's a possibility it's easily prevented by people knowing that it's possible and not lending out 51% of the coins to a single entity.

[bigj]

PoS put to rest:

A big text for nothing.
The only argument is :

there will be times where two nodes disagree

and it's wrong. Or at least not even debated.
Disagree what ? He talks like nodes have their own will.

Disagree by working on different chains for some amount of time.

Forking ? As if PoW cannot fork ?
There is no work (mining) in PoS. You don't compete on wasting resources, that's the goal.

And that's the problem. 

The goal of a PoW-based system is to make it more expensive to amass 51% of the hash rate in order to be able to control the outcome of a fork.  (After all, what is a fork but a disagreement about which transactions to include and who should get paid for the block?).

A PoS-system is aptly named, because it rewards amassing that 51%.

The PoS boosters handwave and claim that doing so would devalue the coins owned by the 51% attacker, but that really just means the attacker would need to be more subtle.

It's a deeply flawed idea in pursuit of a good, but I believe impossible, goal -- decentralized, untrusted consensus without waste.

I love to read about impossible goals! So, things like "decentralized, untrusted consensus without waste" attract me like a good pot of honey.

In this regard, I like to draw your attention to Arrow’s paradox (see, e.g., http://en.wikipedia.org/wiki/Arrow's_impossibility_theorem), which may serve well as a good source of further discussion here.

Best, brainbug

[aminorex]

My default assumption is that any new coin is either a scam or a folly.

even if this was 100% correct, it doesn't mean there's no opportunities left for insane profits (3-10X on top of Bitcoin is possible with some alts)

The vast majority of buyers lose and a small minority win.  You are perhaps better off robbing liquor stores.  The amounts involved are similar, the odds of success are better, and it is equally honorable.

Unless the market agrees with you in the log run, investing in an alt you believe in just makes it less likely that you will sell in time.

[BombaUcigasa]

PoS put to rest:

that mechanism is far less than optimal for many reasons and excludes those who don't have mining gear and favours those with higher powered mining gear. It's no different to "rich getting richer" in nxt. In that respect, pow is elitist

This is the problem with proof of stake: it was invented by people who have no idea what problem mining is supposed to solve and have some agenda other than solving that problem.

Mining is not about allocating the issuance of new coins. The fact that they are tied together in Bitcoin is a temporary coincidence. Mining is about solving the problem of distributed consensus - how do a bunch of independent nodes spread all over the planet agree on a precise ordering of transactions when every node must operate with an incomplete view of the network and anybody might be trying to cheat?

This problem has nothing to do with elitism or notions of fairness or populism. Overlaying those agendas into the solution is a great way to not solve the problem.

As nodes on the network continually work to establish a consistent of narrative of what has happened in the netwowk based on their own incomplete knowledge, there will be times where two nodes disagree. Mining is nothing more than a signalling mechanism which provides an objective basis for choosing which version of history to treat as correct, whenever a conflict occurs such that more than one alternative version exist.

The design criteria for what makes a good mining algorithm comes from signalling theory:

Two individuals have access to different information.

They could both gain if they could honestly share this information.

However, their interests do not coincide entirely, and so each has an incentive to deceive the other.

How can honest communication be ensured?

How can honest communication be ensured despite conflicting interests between a signaller and a signal receiver?

Economists and biologists independently proposed that the costs associated with producing signals can provide a solution to this problem. Loosely paraphrased, the solution typically takes the following form.

Suppose that signals are costly, and that for one reason or another, lies cost more than honest signals.

If telling the truth is cheap enough and telling a lie is costly enough, it may be worthwhile to communicate honestly but not to lie.

There's a reason that when Wei Dai proposed b-money in 1998, he didn't even bother to explain why calculations in a proof of work system, "must be easy to determine how much computing effort it took to solve the problem and the solution must otherwise have no value, either practical or intellectual." He assumed this statement would be so obviously true that no explanation was needed. Apparently this is no longer the case.

The signal sent by proof of work is the amount of opportunity cost the miner has paid in order to produce the block. The fact that mining calculations are completely useless outside the signalling system itself is what makes lies more expensive than telling the truth, thus satisfying the conditions for honest signalling. The opportunity cost the miner pays to produce a block only represents a profitable trade for the miner if the network accepts their block. So when it comes to a node in the network choosing between two valid blocks, choosing to accept the block with the higher PoW means choosing the block which produced by the miner who has the most at stake in terms of opportunity cost paid.

Note that if the miner has to use specialized hardware for which there is no possible use other than mining, the signal is even better than performing otherwise-useless calculations on general purpose hardware. Higher opportunity costs = more reliable signal.

Proof of work is a proof of stake system, the only one that actually works.

PoS coins use the number of coins held as the basis for their signalling system. Since coins have an exchange rate, they obviously do not fulfill the criteria of having no value, either practical or intellectual. Thus PoS is not an viable mechanism for honest signalling.

Latter emphasis mine.

Related of the cost of PoS and PoW, two identical blockchains with identical parameters but only one difference, the method used for block generation (and reward generation) will cause the PoS chain to consistently require LESS and less costs to secure.

This might look like it's a good idea, to have more security with less costs, except it's not so. With less costs to secure the chain, someone with a higher budget can execute forks more easily, as time passes even more so.

What's the utility provided by a less secure blockchain compared to a more secure one? Obviously smaller, so it will be used less. A less used blockchain will have a lower price per transaction/coin/reward, it all spirals down into nothingness.

Private keys should not be valued based on their past properties, only current properties (for example the Bitcoin core update to allow redemption of unspendable outputs creates value for previously used but empty private keys that could reclaim those funds in the future). As such, an address that used to have more coins than any other should be valued at 0 if it has 0 coins in it now. Instead PoS values empty private keys above other empty private keys. I didn't even mention the demurrage ideas, where free to use funds are taxed, so you have even less utility for your coins if you intend to store value. It's really messed up, why would you use this shittier lower utility version?!

Bottom line: if your coin is cheaper to mine/distribute (because of PoS), it will have a lower value compared the PoW version. Why would you store and the lower value coin?

[binaryFate]

I wonder what's explaining the recent surge on XMR mining. The price has been stagnating and is way below the break even point (which should be around 0.006 by now). Thoughts?

[darkota]

I wonder what's explaining the recent surge on XMR mining. The price has been stagnating and is way below the break even point (which should be around 0.006 by now). Thoughts?

I recently started mining. I've also convinced a friend with a GPU who used to mine Dark/Litecoin to mine XMR.

I'm guessing a lot of more people are transferring their gpu miners to mine XMR.

[dunchy]

I wonder what's explaining the recent surge on XMR mining. The price has been stagnating and is way below the break even point (which should be around 0.006 by now). Thoughts?

A little piece of shit called Claymore. Making us all look like fools, and  slowly but certainly turning xmr into shitcoin. Let that be a lesson for any future coin that going live without a gpu miner ready is a death sentence.

[rpietila]

How is GPU miner a death sentence for XMR? Isn't it good to have it, esp. after the accusations that currently botnets control most of the mining?

(Economically, the added value of mining is in the coin distribution, the network security and the statement of honesty/fairness by the devs. It is not intended to produce profit to the miners, quite the contrary - the marginal miner should be mining at a small loss in normal circumstances.)

[devphp]

XMR is supposed to be more inflationary than other CN coins by design, it doesn't matter if it's CPUs or GPUs mining it, miners will dump, it's a law. The more coins they have mined, they more the supply they have to dump.

[superresistant]

PoS put to rest:

that mechanism is far less than optimal for many reasons and excludes those who don't have mining gear and favours those with higher powered mining gear. It's no different to "rich getting richer" in nxt. In that respect, pow is elitist

This is the problem with proof of stake: it was invented by people who have no idea what problem mining is supposed to solve and have some agenda other than solving that problem.
Mining is not about allocating the issuance of new coins. The fact that they are tied together in Bitcoin is a temporary coincidence. Mining is about solving the problem of distributed consensus - how do a bunch of independent nodes spread all over the planet agree on a precise ordering of transactions when every node must operate with an incomplete view of the network and anybody might be trying to cheat?
This problem has nothing to do with elitism or notions of fairness or populism. Overlaying those agendas into the solution is a great way to not solve the problem.
As nodes on the network continually work to establish a consistent of narrative of what has happened in the netwowk based on their own incomplete knowledge, there will be times where two nodes disagree. Mining is nothing more than a signalling mechanism which provides an objective basis for choosing which version of history to treat as correct, whenever a conflict occurs such that more than one alternative version exist.
The design criteria for what makes a good mining algorithm comes from signalling theory:

Two individuals have access to different information.
They could both gain if they could honestly share this information.
However, their interests do not coincide entirely, and so each has an incentive to deceive the other.
How can honest communication be ensured?

How can honest communication be ensured despite conflicting interests between a signaller and a signal receiver?
Economists and biologists independently proposed that the costs associated with producing signals can provide a solution to this problem. Loosely paraphrased, the solution typically takes the following form.

Suppose that signals are costly, and that for one reason or another, lies cost more than honest signals.

If telling the truth is cheap enough and telling a lie is costly enough, it may be worthwhile to communicate honestly but not to lie.

There's a reason that when Wei Dai proposed b-money in 1998, he didn't even bother to explain why calculations in a proof of work system, "must be easy to determine how much computing effort it took to solve the problem and the solution must otherwise have no value, either practical or intellectual." He assumed this statement would be so obviously true that no explanation was needed. Apparently this is no longer the case.
The signal sent by proof of work is the amount of opportunity cost the miner has paid in order to produce the block. The fact that mining calculations are completely useless outside the signalling system itself is what makes lies more expensive than telling the truth, thus satisfying the conditions for honest signalling. The opportunity cost the miner pays to produce a block only represents a profitable trade for the miner if the network accepts their block. So when it comes to a node in the network choosing between two valid blocks, choosing to accept the block with the higher PoW means choosing the block which produced by the miner who has the most at stake in terms of opportunity cost paid.
Note that if the miner has to use specialized hardware for which there is no possible use other than mining, the signal is even better than performing otherwise-useless calculations on general purpose hardware. Higher opportunity costs = more reliable signal.
Proof of work is a proof of stake system, the only one that actually works.

PoS coins use the number of coins held as the basis for their signalling system. Since coins have an exchange rate, they obviously do not fulfill the criteria of having no value, either practical or intellectual. Thus PoS is not an viable mechanism for honest signalling.

Latter emphasis mine.

Related of the cost of PoS and PoW, two identical blockchains with identical parameters but only one difference, the method used for block generation (and reward generation) will cause the PoS chain to consistently require LESS and less costs to secure.
This might look like it's a good idea, to have more security with less costs, except it's not so. With less costs to secure the chain, someone with a higher budget can execute forks more easily, as time passes even more so.
What's the utility provided by a less secure blockchain compared to a more secure one? Obviously smaller, so it will be used less. A less used blockchain will have a lower price per transaction/coin/reward, it all spirals down into nothingness.
Private keys should not be valued based on their past properties, only current properties (for example the Bitcoin core update to allow redemption of unspendable outputs creates value for previously used but empty private keys that could reclaim those funds in the future). As such, an address that used to have more coins than any other should be valued at 0 if it has 0 coins in it now. Instead PoS values empty private keys above other empty private keys. I didn't even mention the demurrage ideas, where free to use funds are taxed, so you have even less utility for your coins if you intend to store value. It's really messed up, why would you use this shittier lower utility version?!
Bottom line: if your coin is cheaper to mine/distribute (because of PoS), it will have a lower value compared the PoW version. Why would you store and the lower value coin?

Why don't people understand that the goal of a PoS crypto is not to be just an other 'coin'.
The value of Nxt, that I know well, doesn't come from the coins but from the services it provide.
You want to build your business on Nxt, send encrypted message, vote, exchange cryptos on a decentralized exchange, send automated transactions, you want to have your P2P good store on that crypto because it cannot be taken down.

Talking about 'coins coins coins' is pointless.

Moreover, a PoS crypto doesn't fork by itself, it has to be intentional. It is the same as forking a PoW.
So the value of the crypto must come from it use and from it's community, not from pumping 'coins'.

EDIT :
On a PoW, a miner doesn't care about the crypto. He just want to convert is ASAP to FIAT to pay his bills.
On a PoS like Nxt, the people interested want to build something from it.
Every business or service added to a PoS crypto make it more resilient.

[rpietila]

XMR is supposed to be more inflationary than other CN coins by design, it doesn't matter if it's CPUs or GPUs mining it, miners will dump, it's a law. The more coins they have mined, they more the supply they have to dump.

There is no such thing as "more inflationary", all coins will eventually reach 100%. If you do it faster, your inflation in the beginning is high and later it is slow, or the other way round.

(I did not even understand if you meant that it will have more or less coins issued after, say, 3 years than other CNs...)

Economically as long as the mining is fair (which means = competitive, which means = no excess profits), it does not matter if the miners dump 100% or 0% of their coins. It is nevertheless part of the S/D equation.

[devphp]

If you do it faster, your inflation in the beginning is high and later it is slow, or the other way round.

Yes, that's what I meant - in the beginning, as everybody complains about short-term effects on the price of XMR. Long term most sensible CN (excluding Bytecoin and Duckcoin) coins will have the same total supply in circulation, but at the beginning it's different, hence it takes more buying orders to absorb the initially sold supply of XMR.

[nakaone]

If you do it faster, your inflation in the beginning is high and later it is slow, or the other way round.

Yes, that's what I meant - in the beginning, as everybody complains about short-term effects on the price of XMR. Long term most sensible CN (excluding Bytecoin and Duckcoin) coins will have the same total supply in circulation, but at the beginning it's different, hence it takes more buying orders to absorb the initially sold supply of XMR.

for some reasons it does not matter at all does it? - the emmission curve of bbr is slower and it is, as well as xmr, a very good project, but its market cap is less than one forth of moneros. maybe it is only important to define in which way and at what speed a coin is produced and the market participants are pricing this in.

coming from the economics perspective and understanding too little of mining - can someone explain the mining mess around xmr?

[devphp]

for some reasons it does not matter at all does it? - the emmission curve of bbr is slower and it is, as well as xmr, a very good project, but its market cap is less than one forth of moneros. maybe it is only important to define in which way and at what speed a coin is produced and the market participants are pricing this in.

All CN coins are still so immature, that it's too early to predict anything. We can take into account the factor of initial inflation and how this can affect the price, but there are just too many other underlying short-term and long-term factors to tell anything for certain, not the least one of which is the initial support of XMR by hero members with many bitcoins. Would they continue to buy a quickly increasing supply of moneros to support the price? That's the question we should be asking.

[rpietila]

Yes, that's what I meant - in the beginning, as everybody complains about short-term effects on the price of XMR. Long term most sensible CN (excluding Bytecoin and Duckcoin) coins will have the same total supply in circulation, but at the beginning it's different, hence it takes more buying orders to absorb the initially sold supply of XMR.

for some reasons it does not matter at all does it? - the emmission curve of bbr is slower and it is, as well as xmr, a very good project, but its market cap is less than one forth of moneros. maybe it is only important to define in which way and at what speed a coin is produced and the market participants are pricing this in.

coming from the economics perspective and understanding too little of mining - can someone explain the mining mess around xmr?

I don't know about any mess, but as for mining schedule:

...it cannot be too slow, nor too rapid, nor look artificial, and it must provide network security at all times (one reason for ~1% constant yearly inflation). XMR is the best I've seen, BBR is close.

I still haven't found a compelling reason to buy BBR though. Only one of them can win, and currently it seems obvious that XMR has the lead.

[Vanderi]

Yes, that's what I meant - in the beginning, as everybody complains about short-term effects on the price of XMR. Long term most sensible CN (excluding Bytecoin and Duckcoin) coins will have the same total supply in circulation, but at the beginning it's different, hence it takes more buying orders to absorb the initially sold supply of XMR.

for some reasons it does not matter at all does it? - the emmission curve of bbr is slower and it is, as well as xmr, a very good project, but its market cap is less than one forth of moneros. maybe it is only important to define in which way and at what speed a coin is produced and the market participants are pricing this in.

coming from the economics perspective and understanding too little of mining - can someone explain the mining mess around xmr?

I don't know about any mess, but as for mining schedule:

...it cannot be too slow, nor too rapid, nor look artificial, and it must provide network security at all times (one reason for ~1% constant yearly inflation). XMR is the best I've seen, BBR is close.

I still haven't found a compelling reason to buy BBR though. Only one of them can win, and currently it seems obvious that XMR has the lead.

First, xmr was mined by amazon spot instances, cpus, perhaps botnets.
Then Claymore released a closed source ATI GPU miner, with openly announced 5% of the cycles reserved as devfee.
Cbuchner again, decided to keep his Nvidia Cudaminer miner private and only mine for himself.

Fast forward a couple of weeks and other people have made a GPU Nvidia miner, and Claymore have put in an option in his ATI miner which makes it slower but also waives his devee, which by some was perceived as hurting the mining scene and being too large.

Mining software simply evolving. Kinda organically. No mess tho imo, but it is a matter of preference on what to consider a mess and what not

[nakaone]

.

thanks for clarification

[Vanderi]

.

thanks for clarification

yv