rpietila Altcoin Observer

[Este Nuno]

Copycats don't win in innovation markets, because the innovation is ongoing and driven by the team who had the insight to innovate. Thus the herd moves in to support the innovator. Rather Monero's developers would be wise to jump in to contribute if something else is racing ahead rather than fighting the trend and being always one step behind the innovations.

Innovators are going to reap rewards from speculators, no doubt about that. Coming out with a new solution to a mostly solved problem(anonymity) every week is a profitable enterprise, as we can see . But real people using the currency(i.e. Bitcoin) is more important in the long run I think. Your post earlier which linked to Peter R's post inspired me to write an article about why I think it's more important to focus development and community on user accessibility and ease of use rather than cutting-edge features that appeal to the altcoin markets.

I know your stance and the problems that you feel need to be solved. And Bitmark doesn't solve the scaling problem or the transaction fee issue(yet anyway). But I honestly feel that focusing on getting average people to use crypto, even if you have to backdoor them into using it through easy to use webapps, is the best approach.

[1715417219]

1715417219

[AnonyMint]

Where we may disagree is I posit that the price of the coin is related to the cost of the mining investment in it annually, modulated by the percentage of the float added each year by mining...

...As to whether higher prices (i.e. via usership demand) drive more investment in mining, I posit that network effects and the Metcalf law correlation that Peter R showed are driven more by the investment in mining, than vice versa...

...so when the investors are not also the miners early on then there is a loss of synergy...

Related yes, but causality only runs in one direction and it is toward mining not away from it. Empirical evidence (which is hiding on this forum somewhere unless the author deleted it, which I doubt, but I can't find it) is that mining is driven by price, not the other way around. That is to say, you get the mining demanded by those who compete to hold the coin by driving up the price; you don't get the price driven higher by more mining.

This is probably true for all the existing crypto-currencies, and if true, I posit this is because users are not mining with their sunk costs. Thus investors who don't mine are in dominant control of the price. Unfortunately I posit that this appears to cause suboptimal adoption rate and future, e.g. log-logistic.

Whereas, if the users of the coin are mining with sunk costs, I expect the price of the coin wouldn't factor as much in their decision to mine or not. And then there is fact that people who mine coins professionally are unlikely to sell them for less than their cost of mining. Thus the more you drive the hashrate up by popularizing mining, the higher the ask price of the coin. Then the investors who don't mine are no longer the only factor modulating the price.

This doesn't answer the question of what does create and drive demand for the coin, just what doesn't (mining).

Unfortunately you are correct that all existing crypto-currencies don't have the requisite synergy with mining. Bitcoin may have had it early on which resulted in a rocket shot logistic adoption curve (using price as a proxy). But this fell to log-logistic as the mining synergy was lost with GPU mining and then more so with ASICs mining.

Thus I am of the opinion that so far all we have are investment pump assets, not currencies.

[aminorex]

As a miner, I will not sell at a loss.  My withholding of supply reduces supply and thus affects price.  You can call it reserve demand if you wish.  If empirical data says otherwise, then it is misinterpreted.  In addition to being a simple logical necessity, awareness of this dynamic has demonstrated, to my own satisfaction and gratification, pragmatic value in estimating resistance levels, air gaps in the supply which require momentum to overcome.

[AnonyMint]

We are running out of time. Hopefully we can get our efforts aligned and cooperate.

[smooth]

In response to both aminorex and AntonyMint, the problem with the argument of mining driving up price is that it also withholds demand. A miner who is willing to hold a coin (or even willing to mine given the realistic possibility of holding the coin) someone who values the coin enough to have otherwise bought it given frictionless exchange. But having mined it, the miner need not do so (or need only buy less), thereby reducing demand (i.e. downward pressure on price).

Equations can probably show that these two effects exactly balance in the presence of constant supply difficulty retargeting, in fact I'm fairly sure of it, but I hate math now, so I won't be one to write them down.

[TheUniporn]

Hopefully we can get our efforts aligned and cooperate.

I would love to see this!

[AnonyMint]

In response to both aminorex and AntonyMint, the problem with the argument of mining driving up price is that it also withholds demand.

Rising price reduces demand in consumption markets, but investment markets I believe exhibit the opposite effect. Perhaps I didn't understand your point?

It is very interesting for me to note that you see mining as an orthogonal activity. I want to say more about that, but now is not the right time.

[canonsburg]

Anyone have thoughts on this new BCN development?

https://bitcointalk.org/index.php?topic=512747.3520

Bytecoin is going to have a major update on 08/13/2014, 09:00 GMT

Upcoming features:

— Updated block reward scheme
— Daemon RAM consumption is optimized
— Faster wallet refresh
— Transaction priority based on tx fee
— Transactions are returned from tx pools after 24 hours
— Dynamic maximum block size limit
— Reduced default transaction fee
— Various network health updates
— Multi-signatures

Multi-signatures is an essential strategic upgrade of Bytecoin that allows for sophisticated payment scenarios to be processed. This is the next significant step for the whole CryptoNote technology that will make Bytecoin excel in the cryptocurrency world.

..............................<truncated>

[aminorex]

the problem with the argument of mining driving up price is that it also withholds demand. A miner who is willing to hold a coin (or even willing to mine given the realistic possibility of holding the coin) someone who values the coin enough to have otherwise bought it given frictionless exchange.

In the long run, they would balance, if everyone were a rational actor, I agree.  I also think the assumptions of that model are false.  Non-rational motives and time and liquidity preferences create feedback loops.

Miners are not generally rational actors until and unless they operate at industrial scale.  A miner has sunk costs, which leads to sunk cost fallacy disproportionately, for example.  They also tend to avoid sinking those costs.  Persistent miners tend to be strongly biased to accumulate the coin which they are mining, or they would switch to another coin.  

Since willingness to lock up capital in mining is typically low when it is unprofitable, they accumulate simultaneously with mining.  This has the opposite effect from the balancing effect you observe.  The price and difficulty act more like a quasiperiodic linked pendulum system than like a balance.  A price spike will create a rush to sink costs.  The subsequent decline will not cause liquidation of capital plant.  Neither will it cause a decline in demand while mining and holding.  The holding miner is intent on accumulation, and continues to buy coins.  The funds spent on mining hardware are more like funds spent on coke and hookers than they are like a productive asset at this point.

[smooth]

the problem with the argument of mining driving up price is that it also withholds demand. A miner who is willing to hold a coin (or even willing to mine given the realistic possibility of holding the coin) someone who values the coin enough to have otherwise bought it given frictionless exchange.

In the long run, they would balance, if everyone were a rational actor, I agree.  I also think the assumptions of that model are false.  Non-rational motives and time and liquidity preferences create feedback loops.

I do not believe that assumptions of rationality are needed here, nor is "the long run" needed. My comments about displaced demand are supportive of the model. That is, an attempt to explain a possible mechanism behind what is ultimately a structural model, not a behavioral one. Perhaps my attempt fell short, but if that mechanism is incorrect, then there must be another one, possibly unidentified.

I do agree that if mining serves to attract participants that can have the secondary effect of popularizing the coin, creating promoters, etc. which then can have a feedback effect of increasing demand.

But in reality, in most cases today, I just don't believe many miners behave as you describe any more, getting attached to coins and such (though they used to, with DOGE probably being the peak of this). I see most miners today just jumping to whatever is profitable, not really knowing or caring what it is, and then leaving when most of the hash rate gets taken over by pros. Look at XCN now, and its only been a week. The top 3 miners on 1GH (the only pool) have 50% of the total hash rate. I'm too lazy to add up the top 10 but that must be a huge percentage. Many of the early miners have already moved on to something else.

[aminorex]

But in reality, in most cases today, I just don't believe many miners behave as you describe any more, getting attached to coins and such (though they used to, with DOGE probably being the peak of this). I see most miners today just jumping to whatever is profitable...

Ah, but XMR is different.  More like early BTC than DOGE, in terms of mindshare.  Other coins, not so much.  Mark my words, when XMR sees a broader demographic, it will inspire all the extravagant absurdities that human imagination can devise:  Music videos a la style de zhoutonged, infant tattoos, fremen performance art, and the ilk.  Meanwhile, I think it has a substantial enthusiast appeal, and consequent mining behaviour.  But I don't have a way to measure the relative proportions of various mining demographics, so it is fundamentally conjectural.

[AnonyMint]

When the hashrate is rising sufficiently fast, it makes more sense to rent than to acquire sunk costs. In this case, price changes transfer more efficiently to difficulty, thus investors are more in control of the price, not miners. Or you have professionals who can do complex analysis and hedging of their sunk costs so that price volatility and trend transfer efficiently to difficulty (although quants usually don't correctly account for long-tail events).

But for a home PC owner, renting is more expensive than deploying unused CPU cycles. And if the appliances in the home use significantly more electricity than the PC (or the PC was on all the time any way and wasn't using idle power down), then mined coins are essentially free from the perspective of the home miner. Thus this hashrate is insensitive to changes in price, thus the miners are more in control of the price. In this case, they are more likely to spend $50 a year[1] of coins (generated throughout the year, not all at once) on micro transactions, than to bother with selling them on an exchange. Essentially they have transferred underutilized value from the cost of their PC into the coin.

[1]Some computation of the rate at which CPUs are replaced by newer models and the performance increases for the PoW for the new models, yields the lifespan of the CPU for mining and thus how much value from the cost of the system transferred into the coin each year.

Or we can look at Bitcoin's example market cap of $billions for millions of users, so the annual debasement rate times $1000s per user. Again $50 seems ballpark.

Note that Metcalf's law as verified by Peter R for transactions says the value should scale by the square of some proxy for users, so apparently the number of transactions is not growing uniformly with the number of users, otherwise would expect the market cap of Bitcoin to be $trillions already (perhaps that $50 rises to $5000 in a virtual economy that is booming beyond current imagination). And this is true because most users are investors, not currency users.

In the Quantity Theory of Money increasing velocity-of-money (with a non-declining money supply) is coincident with an expanding economy and higher GDP..

Scale the currency usage more and fiat is toast. We can move on to the Knowledge Age and be done with this all this crap the world is mired in now.

This is why I have a problem supporting Monero because it can't scale up, or at least not without mining being very centralized with such professional miners possessing an incentive to kill home PC mining.

Professional mining is all about control of capital, financing, and economies-of-scale (i.e. proxy control by our fiat overlords). The home PC users don't have this, but they can mitigate the professional miners if the professional miners can not attain a Mhash/$ and Mhash/Watt advantage, e.g. which professional miners normally can attain by funding the development of ASICs that are not in the home PC users' sunk cost.

Another boost for home PC mining, would be if there was some other popular advantage to mining in addition to the "free coins" generated, but that did not generate any additional financial gain for the professional miners.

[dga]

https://github.com/jl777/privateNXT

So is this just a vanilla CryptoNote fork? What does it have to do with NXT? How is this implementing ring signatures in to NXT?

Or is it just the same type of thing that's happening with "BitcoinDark"? Name the product after something established to imply association?

It's a stock CN fork. If you look his commits: https://github.com/jl777/privateNXT/commits/master he's created the genesis block hash on July 3 and nothing else. It's completely stock, unchanged from the CryptoNote "starter kit".

Correct.  I believe he's moved his development of privacy-enhanced NXT to a BoolBerry-derived fork instead:

https://github.com/jl777/pNXT

which is a little more active.   He posted about this on July 5:

https://bitcointalk.org/index.php?topic=577267.msg7691010#msg7691010

[dEBRUYNE]

https://github.com/jl777/privateNXT

So is this just a vanilla CryptoNote fork? What does it have to do with NXT? How is this implementing ring signatures in to NXT?

Or is it just the same type of thing that's happening with "BitcoinDark"? Name the product after something established to imply association?

It's a stock CN fork. If you look his commits: https://github.com/jl777/privateNXT/commits/master he's created the genesis block hash on July 3 and nothing else. It's completely stock, unchanged from the CryptoNote "starter kit".

Correct.  I believe he's moved his development of privacy-enhanced NXT to a BoolBerry-derived fork instead:

https://github.com/jl777/pNXT

which is a little more active.   He posted about this on July 5:

https://bitcointalk.org/index.php?topic=577267.msg7691010#msg7691010

There are two big walls by the way @ poloniex (on BBR), 53 BTC @ 0.00014550 and 34 BTC @ 0.00019550. Personally Monero is the number 1 CN coin for me, but are there opinions on BBR here? Maybe we can see it as the LTC of CN coins..

[thefunkybits]

LTC breaking down again...

[AnonyMint]

Does anyone else find it interesting that Darkwallet is struggling to raise enough funds to get to release, while tens of thousands of BTC are thrown around in the alt world on mere whispers of anonymity? http://www.reddit.com/r/Bitcoin/comments/2de9ff/is_darkwallet_gone/

Yes, it's going to be inferior to XMR's anonymity. We know that already. But this is Bitcoin we're talking about here. Even half-assed anon is better than nothing.

Apparently a lot of people read this thread?

[Este Nuno]

Does anyone else find it interesting that Darkwallet is struggling to raise enough funds to get to release, while tens of thousands of BTC are thrown around in the alt world on mere whispers of anonymity? http://www.reddit.com/r/Bitcoin/comments/2de9ff/is_darkwallet_gone/

Yes, it's going to be inferior to XMR's anonymity. We know that already. But this is Bitcoin we're talking about here. Even half-assed anon is better than nothing.

Apparently a lot of people read this thread?

I deleted the post. I don't post in any of the other rpietila Bitcoin discussion threads so I forgot that this thread is about a specific subtopic.

My mistake.

[digicoin]

I think that XMR should change its algorithm.

My XMR blockchain was 6 days behind the network: 8600 blocks unsync-ed. It took me 40 minutes sync-ing the blockchain from 1h33 - 2h25 PM

My BBR blockchain was 23 days behind the network: 16900 block unsync-ed. It took me less than 3 minutes sync-ing the blockchain.

To end user, BoolBerry is technically better than XMR. I don't think BCN's CryptoNight is good for XMR in long term.

[smooth]

I think that XMR should change its algorithm.

My XMR blockchain was 6 days behind the network: 8600 blocks unsync-ed. It took me 40 minutes sync-ing the blockchain from 1h33 - 2h25 PM

That's a hash rate of 4/sec. Doubtful the PoW algorithm had much to do with this. What device is it?

PoW is not the only difference between BBR and XMR. Another is many more transactions on XMR. Or you may simply have been connected to slower peers.

[digicoin]

I think that XMR should change its algorithm.

My XMR blockchain was 6 days behind the network: 8600 blocks unsync-ed. It took me 40 minutes sync-ing the blockchain from 1h33 - 2h25 PM

That's a hash rate of 4/sec. Doubtful the PoW algorithm had much to do with this. What device is it?

PoW is not the only difference between BBR and XMR. Another is many more transactions on XMR. Or you may simply have been connected to slower peers.

Same laptop: Dell Inspiron 15 - Intel Core i5 - 4200U 1.6 Ghz - 6 GB RAM. XMR is always much slower than BBR on my laptop. I open XMR wallet more often than BBR one: every day or every 3-4 days. XMR daemon is slow all the time. It is strange that BBR can sync the blockchain much much faster than XMR