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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1805082 times)
adam3us
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November 01, 2014, 06:15:56 PM
 #15241

I read it but I feel like I'm missing something:

Quote
its a 2 way peg, so both BTC and scBTC can move freely back and forth.
Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

Since you are free to move coins between BTC and scBTC, the price will be the same. You don't sell scBTC for a lower price when you can transfer it back to BTC and sell it for the full price.

Correct.  I think its worth clarifying that the peg is algorithmic, because its seems from the thread that some people may not understand that.  You, personally, can ask the network automatically to swap unlimited quantities of BTC on the sidechain for BTC on the main bitcoin chain.

The only reason to swap with users using atomic swaps or trades is to do that faster.  No one is going to take anything other than a negligible price difference because they can click a button and move the coins between chains themselves.

Further because that 2wp backstop is there, and anyone and his dog can do arbitrage, with full confidence that they'll be able to exercise the 2wp and capitalise on the small time-preference, the will be small.  It seems just as likely that the sidechain coins sell at a small premium for the time-preference access to side-chain features.  (Time-preference means someones preference to gain access to something sooner rather than waiting eg 24hrs, and they'll sometimes be willing to pay a small fee to get it earlier, eg check advances or such things).

I dont think it realistic that we would see anyone willing to sell sidechain BTC at anything significantly below par in either direction, to do so is to burn money needlessly.  People will arbitrage it and its open to anyone to arbitrage.  So unless someone wants to burn money (and bitcoin already supports proof of burn or pay to miners if you're into burning money or donating to miners), no one will be offering to swap sidechain BTC for BTC at anything far below or above $350 (assuming current market price of $350).  eg $349.50 to $350.50 might be an example which is 15 basis points, that'd give someone a 15% return on an annual basis with steady arbitrage for a 2 day clearance time on the peg.  They can maybe get a higher return (and hence be willing to offer even lower margins) by holding a float on both sides and cancelling some trades against others as those happen faster so they get more than one arbitrage fee per exercise of the 2wp.

Obviously no one is encouraging anyone to put real money into untested or buggy sidechains.  I dont think there will be lots of sidechains and the main sidechains will be extremely well tested and coded to the same rigor as bitcoin itself.

Adam

hashcash, committed transactions, homomorphic values, blind kdf; researching decentralization, scalability and fungibility/anonymity
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November 01, 2014, 06:16:02 PM
 #15242

Who her likes Konrad Graf? He is a leading Bitcoin economist.

He said both will be expected to trade in exchanges and probably for different prices. Who are you to disagree?
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November 01, 2014, 06:30:00 PM
 #15243

Who her likes Konrad Graf? He is a leading Bitcoin economist.

He said both will be expected to trade in exchanges and probably for different prices. Who are you to disagree?
Haven't heard of him, but economists are typically horrible when it comes to speculative calls. Cheesy

I'm pretty sure that the price difference will be negligible and close to whatever ratio is pegged at protocol. If you are certain that you are right, it seems it is an inevitability that this arbitrage perpetuum mobile will drag Bitcoin to nothingness under the assumption that it will always be valued below the threshold for arbitrage and that this feedback loop will continue forever. Why not sell Bitcoin in that case?

I keep thinking I'm missing something obvious, because this seems a ridiculous train of thought from you. Is the bear market getting to you? Tongue

"Bitcoin had been transformed from an anarachistic challenge to the financial status quo, to the crypto spawn of Satan, fuelled by cut-throat greed and delusions of avarice." - MatTheCat
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November 01, 2014, 06:34:35 PM
 #15244

Who her likes Konrad Graf? He is a leading Bitcoin economist.

He said both will be expected to trade in exchanges and probably for different prices. Who are you to disagree?

Quote
$350 (assuming current market price of $350).  eg $349.50 to $350.50 might be an example
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November 01, 2014, 06:43:08 PM
 #15245

- snip - one of many desperate lines of FUD -
...
I keep thinking I'm missing something obvious, because this seems a ridiculous train of thought from you. Is the bear market getting to you? Tongue


Something is making the guy soil himself multiple times per day.  Probably being wrong for nearly a year is contributing as stress, but it doesn't really help shed light on the root cause of his malady.


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November 01, 2014, 07:48:06 PM
 #15246

simple theory question for all SC proponents.  so simple in fact what am i missing?

we have 13M BTC @ around $325.  SC comes along and lets say 3M BTC --> scBTC (just for illustration).  we know that the price of scBTC has to be lower given MM, newness, being unproven, risk of failure, etc.  let's say price starts off @ $100.

why don't arb bots circle back around and drive BTC price down to say $250-270 or whatever the equilibrium is btwn BTC and scBTC, which we know is lower?  multiply this by 1000 SC's.

Btc price would go up first, because lower monetary base in the proven old bitcoin block chain (13m -> 10m)

no, the BTC have just been transformed to lower value units, scBTC, b/c they have been moved to a less secure, unproven ledger.  this will drag down the BTC price to an equilibrium price btwn the two.

In order for the arb to work, the coins have to move back to the bitcoin blockchain.
The first app is a mixing service for stolen coins it is likely there will be arb opportunities and likely Bitcoin price will drop.

Why? People will just move dirty BTC to mixSCBTC, stirr well, and then move them back to mainchain, no?


The mix is better if new virgin players pull the BTC out. So sell the SC token at a discount in fiat. Then the speculators to take advantage of the arb and now you have clean BTC to pull out (exchange)

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
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November 01, 2014, 07:53:28 PM
 #15247

I read it but I feel like I'm missing something:

Quote
its a 2 way peg, so both BTC and scBTC can move freely back and forth.
Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

Since you are free to move coins between BTC and scBTC, the price will be the same. You don't sell scBTC for a lower price when you can transfer it back to BTC and sell it for the full price.

Correct.  I think its worth clarifying that the peg is algorithmic, because its seems from the thread that some people may not understand that.  You, personally, can ask the network automatically to swap unlimited quantities of BTC on the sidechain for BTC on the main bitcoin chain.

The only reason to swap with users using atomic swaps or trades is to do that faster.  No one is going to take anything other than a negligible price difference because they can click a button and move the coins between chains themselves.

Further because that 2wp backstop is there, and anyone and his dog can do arbitrage, with full confidence that they'll be able to exercise the 2wp and capitalise on the small time-preference, the will be small.  It seems just as likely that the sidechain coins sell at a small premium for the time-preference access to side-chain features.  (Time-preference means someones preference to gain access to something sooner rather than waiting eg 24hrs, and they'll sometimes be willing to pay a small fee to get it earlier, eg check advances or such things).

I dont think it realistic that we would see anyone willing to sell sidechain BTC at anything significantly below par in either direction, to do so is to burn money needlessly.  People will arbitrage it and its open to anyone to arbitrage.  So unless someone wants to burn money (and bitcoin already supports proof of burn or pay to miners if you're into burning money or donating to miners), no one will be offering to swap sidechain BTC for BTC at anything far below or above $350 (assuming current market price of $350).  eg $349.50 to $350.50 might be an example which is 15 basis points, that'd give someone a 15% return on an annual basis with steady arbitrage for a 2 day clearance time on the peg.  They can maybe get a higher return (and hence be willing to offer even lower margins) by holding a float on both sides and cancelling some trades against others as those happen faster so they get more than one arbitrage fee per exercise of the 2wp.

Obviously no one is encouraging anyone to put real money into untested or buggy sidechains.  I dont think there will be lots of sidechains and the main sidechains will be extremely well tested and coded to the same rigor as bitcoin itself.

Adam

That's an idealistic assumption money laundering can cost much over a 10% burn, unsuspecting traders take the arb.

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
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November 01, 2014, 08:04:30 PM
 #15248

- snip - one of many desperate lines of FUD -
...
I keep thinking I'm missing something obvious, because this seems a ridiculous train of thought from you. Is the bear market getting to you? Tongue


Something is making the guy soil himself multiple times per day.  Probably being wrong for nearly a year is contributing as stress, but it doesn't really help shed light on the root cause of his malady.



That's insulting. I've outline why SC will leach value out of Bitcoin and the most viable argument against my point is exchanging value on a side chain. I.e. using side chains as money is using Bitcoin.

It's not no Bitcoin TX fees are paid and the value created by the network effect reside on the SC.

There is no 1:1 peg guarantee. If the SC is inflationary and appeals to a central bank more than Bitcoin they'll use that not BTC. And the minority who want BTC hard money will be eaten for breakfast.

Thank me in Bits 12MwnzxtprG2mHm3rKdgi7NmJKCypsMMQw
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November 01, 2014, 08:10:49 PM
 #15249

I hugely disagree with the belief that sidechains will decrease the value of Bitcoin. Having more uses for the Bitcoin blockchain will almost certainly increase its value, rather than decreasing it.

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November 01, 2014, 08:19:21 PM
 #15250

- snip - one of many desperate lines of FUD -
...
I keep thinking I'm missing something obvious, because this seems a ridiculous train of thought from you. Is the bear market getting to you? Tongue


Something is making the guy soil himself multiple times per day.  Probably being wrong for nearly a year is contributing as stress, but it doesn't really help shed light on the root cause of his malady.



That's insulting. I've outline why SC will leach value out of Bitcoin and the most viable argument against my point is exchanging value on a side chain. I.e. using side chains as money is using Bitcoin.

It's not no Bitcoin TX fees are paid and the value created by the network effect reside on the SC.

There is no 1:1 peg guarantee. If the SC is inflationary and appeals to a central bank more than Bitcoin they'll use that not BTC. And the minority who want BTC hard money will be eaten for breakfast.

the guy is not known for his manners.  in fact, if i say one thing, you can be guaranteed he'll just say the opposite to disagree.
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November 01, 2014, 08:21:48 PM
 #15251

I read it but I feel like I'm missing something:

Quote
its a 2 way peg, so both BTC and scBTC can move freely back and forth.
Can you elaborate? How are the both to be pegged? How is the peg rate determined, and does it float?

Since you are free to move coins between BTC and scBTC, the price will be the same. You don't sell scBTC for a lower price when you can transfer it back to BTC and sell it for the full price.

Correct.  I think its worth clarifying that the peg is algorithmic, because its seems from the thread that some people may not understand that.  You, personally, can ask the network automatically to swap unlimited quantities of BTC on the sidechain for BTC on the main bitcoin chain.

The only reason to swap with users using atomic swaps or trades is to do that faster.  No one is going to take anything other than a negligible price difference because they can click a button and move the coins between chains themselves.

Further because that 2wp backstop is there, and anyone and his dog can do arbitrage, with full confidence that they'll be able to exercise the 2wp and capitalise on the small time-preference, the will be small.  It seems just as likely that the sidechain coins sell at a small premium for the time-preference access to side-chain features.  (Time-preference means someones preference to gain access to something sooner rather than waiting eg 24hrs, and they'll sometimes be willing to pay a small fee to get it earlier, eg check advances or such things).

I dont think it realistic that we would see anyone willing to sell sidechain BTC at anything significantly below par in either direction, to do so is to burn money needlessly.  People will arbitrage it and its open to anyone to arbitrage.  So unless someone wants to burn money (and bitcoin already supports proof of burn or pay to miners if you're into burning money or donating to miners), no one will be offering to swap sidechain BTC for BTC at anything far below or above $350 (assuming current market price of $350).  eg $349.50 to $350.50 might be an example which is 15 basis points, that'd give someone a 15% return on an annual basis with steady arbitrage for a 2 day clearance time on the peg.  They can maybe get a higher return (and hence be willing to offer even lower margins) by holding a float on both sides and cancelling some trades against others as those happen faster so they get more than one arbitrage fee per exercise of the 2wp.

Obviously no one is encouraging anyone to put real money into untested or buggy sidechains.  I dont think there will be lots of sidechains and the main sidechains will be extremely well tested and coded to the same rigor as bitcoin itself.

Adam

we already know from your paper that there will be at least a delay (2d?) due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect/unhackable right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC fiat price.  its not an instantaneous transfer.
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November 01, 2014, 08:24:09 PM
 #15252

I hugely disagree with the belief that sidechains will decrease the value of Bitcoin. Having more uses for the Bitcoin blockchain will almost certainly increase its value, rather than decreasing it.

and i hugely disagree.  you would have to know ahead of time that the SC innovation would at least offset the known decrease in security of the SC due to MM exactly to get a full value transfer from BTC to scBTC in terms of fiat.

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November 01, 2014, 08:43:01 PM
 #15253


we already know from your paper that there will be at least a delay due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC.

You first must burn bitcoins into SC.

So if you burn 10M of 13M BTC then the rest 3M BTC will increase in scarcity drastically. (3.25 times more scarce)
Then if  scBTC will become worthless and tokens inaccessible then all value(market cap, not tokens) will be returned to BTC.
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November 01, 2014, 08:45:43 PM
 #15254


we already know from your paper that there will be at least a delay due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC.

You first must burn bitcoins into SC.

So if you burn 10M of 13M BTC then the rest 3M BTC will increase in scarcity drastically. (3.25 times more scarce)
Then if  scBTC will become worthless and tokens inaccessible then all value(market cap, not tokens) will be returned to BTC.

THAT will definitely not happen.  otherwise, the scBTC will be transferred back to BTC almost immediately.  or in fact, they would never move at all.  

let me put it in simple terms w/o numbers.

you're taking a chunk of coin off a very secure ledger and moving them over to a less secure ledger.  it's to be expected those coins moved will be worth less b/c they are now less secure.  

b/c of arbitrage, you can expect the moved coin to drag down the price of the not moved coin to a lower equilibrium.
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November 01, 2014, 08:49:15 PM
 #15255

Here's a though experiment. Consider bitcoin and litecoin. They are now distinct, floating. Let's say someone pegs litecoin to bitcoin at a certain ratio, exterminating the litecoins in the process. Let's say 1:1 or 1:4, doesn't matter (as long as it is lower than the floating ratio).

What would happen? Litecoin users would hurry to sell their litecoins to the pegging reserve bank. On that transaction they would currently earn 76 USD per litecoin. Not many people would prefer to hold the litecoins. Litecoin would die.

So if a sidecoin is automatically pegged at a level higher than their natural floating value, the number of sidecoins would be small, severely reducing the liquidity of the sidcoin, therefore reducing the usefulness. They probably can not exist.

The problem is the same with national fiat pegs. When the floating value diverges too much from the peg, the peg has to be abandoned, or changed, else the side-fiat will be abandoned in hyperinflation.

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November 01, 2014, 08:55:44 PM
 #15256


we already know from your paper that there will be at least a delay due to the contest/confirmation time.  also, the SPV proof is untested, unless you want to claim it's perfect right here and now, which would be foolish.  these factors alone will ensure that there is a difference btwn the BTC and scBTC.

You first must burn bitcoins into SC.

So if you burn 10M of 13M BTC then the rest 3M BTC will increase in scarcity drastically. (3.25 times more scarce)
Then if  scBTC will become worthless and tokens inaccessible then all value(market cap, not tokens) will be returned to BTC.

THAT will definitely not happen.  otherwise, the scBTC will be transferred back to BTC almost immediately.  or in fact, they would never move at all.  

let me put it in simple terms w/o numbers.

you're taking a chunk of coin off a very secure ledger and moving them over to a less secure ledger.  it's to be expected those coins moved will be worth less b/c they are now less secure.  

b/c of arbitrage, you can expect the moved coin to drag down the price of the not moved coin to a lower equilibrium.

So SC can only transfer same amount of bitcoins back to MC. => BTC will have same value/scarcity or higher(if there is an irreversible bug on SC).
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November 01, 2014, 08:59:23 PM
 #15257

i think the conceptual problem many are having here is that they're tying the fiat value of scBTC to BTC b/c all they can think of is this risk free put or 2wp.  that is incorrect.

the value of the scBTC, in fiat terms, is dependent on the security of the sidechain upon which they are riding at the time, which by definition we know is less secure and has different economic properties.  it may only have 50% of the Bitcoin network hashing power from MM.

trying to say a new, untested "innovation" will exactly offset the discount the market will apply b/c of less security is naive.  that might only be true over a given time period during which that innovation is tested.

on top of all this, this discussion is naive in that it ignores economic manipulation or speculation.  even speculative attacks as i have already outline.  

the peg itself takes at least 2d to contest/confirm.  as we all know, the price of BTC can fluctuate 10% in a day and i'm sure the fiat value of the scBTC will do so as well.  the prices won't be correlated 1:1 at all times as one would have to assume perfect efficiencies/arbing in market trading which almost certainly never happens.
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November 01, 2014, 09:06:20 PM
 #15258

No emerging SC market will have higher liquidity than the BTC markets. If there is little friction to converting BTC <> SC, then the preferable way will be to convert and sell on the BTCUSD markets, and this can only be done so many times. And of course, converting BTC > SC would serve to make Bitcoin more scarce.

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"these people don't seem to want to stop till Bitcoin is completely destroyed and left like an old cum rag in the corner of the room." - ShroomsKit
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November 01, 2014, 09:10:34 PM
 #15259

No emerging SC market will have higher liquidity than the BTC markets. If there is little friction to converting BTC <> SC, then the preferable way will be to convert and sell on the BTCUSD markets, and this can only be done so many times. And of course, converting BTC > SC would serve to make Bitcoin more scarce.

if you read my simplified version earlier, i think the market will price Bitcoin + SC's in aggregate, not each independently.  what you're doing in essence is moving a bunch of high valued BTC's over to a less secure SC resulting in a lower initial value for scBTC which will then be arbitraged away by pulling down the BTC price to a lower equilibrium.  the "innovation" cannot be depended on initially to offset this dynamic b/c it is unproven.
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November 01, 2014, 09:14:37 PM
 #15260

i think the conceptual problem many are having here is that they're tying the fiat value of scBTC to BTC b/c all they can think of is this risk free put or 2wp.  that is incorrect.

the value of the scBTC, in fiat terms, is dependent on the security of the sidechain upon which they are riding at the time, which by definition we know is less secure and has different economic properties.  it may only have 50% of the Bitcoin network hashing power from MM.

trying to say a new, untested "innovation" will exactly offset the discount the market will apply b/c of less security is naive.  that might only be true over a given time period during which that innovation is tested.

on top of all this, this discussion is naive in that it ignores economic manipulation or speculation.  even speculative attacks as i have already outline.  

the peg itself takes at least 2d to contest/confirm.  as we all know, the price of BTC can fluctuate 10% in a day and i'm sure the fiat value of the scBTC will do so as well.  it won't be 1:1 at all times as one would have to assume perfect efficiencies/arbing in market trading which almost certainly never happens.

But all this can only increase BTC value. We can create bitcoin features SC
a) send me $X USD and your scBTC/BTC address and then  I'll create transaction than you can withdraw Y BTC next month ... bitcoins are locked for some time
b) or I'll send some btc to your address and you are free to withdraw ... after this period expired (you did not withdrawn) I own private key :-)

Edit:
now we can use 3D party (Bitfinex) but we can create sidechain where you can buy/sell feature contract (scBTC).

Edit2:
and it is too risky to add into main bitcoin protocol
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