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Question: Will you support Gavin's new block size limit hard fork of 8MB by January 1, 2016 then doubling every 2 years?
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Author Topic: Gold collapsing. Bitcoin UP.  (Read 2010297 times)
cypherdoc
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April 29, 2015, 04:14:42 PM
 #23221

"uh, Janet, we got a problem..."

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cypherdoc
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April 29, 2015, 04:30:35 PM
 #23222

breakdown starting to accelerate:

cypherdoc
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April 29, 2015, 04:36:58 PM
 #23223

VIX on the move:

Peter R
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April 29, 2015, 05:17:26 PM
 #23224

also, i thought that the trolls said that banksters couldn't give a hoot about Bitcoin? it's too small, too geeky, no one wants decentralization, banksters are pure, yada, yada...
That's exactly my point. Banks will never use the bitcoin blockchain for several reasons.

This reminds me...I recently came across this interesting article from back in February "Fedcoin: On the Desirability of a Government Cryptocurrency" by David Andolfatto (from the Federal Reserve Bank of St Louis).

The article is about how to create "FedCoin," a cryptocurrency similar to Bitcoin, except for the monetary policy part.  Instead of a floating exchange rate, the Fed maintains a credible peg between FedCoin and the USD.  But that's not what I found interesting...

...what I found interesting is that he seems to believe that miners would be needed to process transactions in order to keep FedCoin free from KYC requirements:

Quote from: David Andolfatto
...the e-version of the USD will probably be subject to KYC restrictions, which is unlike paper cash. To the paper cash feeling, we'd need to let the book-keeping done by disinterested third parties, like Bitcoin miners.

What a difference wording makes.  Instead of "anonymous miners" that the likes of Jeffrey Robinson (author of BitCon) claim would never be trusted for important financial transactions, these entities are now "disinterested third parties" and connotatively objective.  They have no reason to be interested in any particular transaction, so why not objectively follow the protocol?

Quote from: David Andolfatto
...to keep Fedcoin free of KYC restrictions, we probably don't want the Fed involved in processing these payments.

Lastly, and unrelated to the topic of who processes the payments, I liked this comment:

Quote from: David Andolfatto
Finally, the proposal for Fedcoin should in no way be construed as a backdoor attempt to legislate competing cryptocurrencies out of existence. The purpose of Fedcoin is to compete with other cryptocurrencies--to provide a property that no other cryptocurrency can offer (guaranteed exchange rate stability with the USD).

Imagine two competing digital currencies: Bitcoin vs Andolfatto's version of FedCoin, identical except for the monetary policy part (Bitcoin is bitcoin and 1 Fedcoin = 1 USD).  Which would the free market choose?


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rocks
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April 29, 2015, 05:39:42 PM
 #23225

also, i thought that the trolls said that banksters couldn't give a hoot about Bitcoin? it's too small, too geeky, no one wants decentralization, banksters are pure, yada, yada...
That's exactly my point. Banks will never use the bitcoin blockchain for several reasons.

This reminds me...I recently came across this interesting article from back in February "Fedcoin: On the Desirability of a Government Cryptocurrency" by David Andolfatto (from the Federal Reserve Bank of St Louis).

The article is about how to create "FedCoin," a cryptocurrency similar to Bitcoin, except for the monetary policy part.  Instead of a floating exchange rate, the Fed maintains a credible peg between FedCoin and the USD.  But that's not what I found interesting...

...what I found interesting is that he seems to believe that miners would be needed to process transactions in order to keep FedCoin free from KYC requirements:

Quote from: David Andolfatto
...the e-version of the USD will probably be subject to KYC restrictions, which is unlike paper cash. To the paper cash feeling, we'd need to let the book-keeping done by disinterested third parties, like Bitcoin miners.

What a difference wording makes.  Instead of "anonymous miners" that the the likes of Jeffrey Robinson (author of BitCon) claim would never be trusted for important financial transactions, these entities are now "disinterested third parties" and connotatively objective.  They have no reason to be interested in any particular transaction, so why not objectively follow the protocol?

Quote from: David Andolfatto
...to keep Fedcoin free of KYC restrictions, we probably don't want the Fed involved in processing these payments.

Lastly, and unrelated to the topic of who processes the payments, I liked this comment:

Quote from: David Andolfatto
Finally, the proposal for Fedcoin should in no way be construed as a backdoor attempt to legislate competing cryptocurrencies out of existence. The purpose of Fedcoin is to compete with other cryptocurrencies--to provide a property that no other cryptocurrency can offer (guaranteed exchange rate stability with the USD).

Imagine two competing digital currencies: Bitcoin vs Andolfatto's version of FedCoin, identical except for the monetary policy part (Bitcoin is bitcoin and 1 Fedcoin = 1 USD).  Which would the free market choose?

That is a fascinating find, Thanks.

It is an acknowledgement of sorts that in order to keep a system honest and running correctly, it needs to be structured as a DAC which functions outside of external influence or government control. What he is saying is in order to ensure the functionality of cash transactions (i.e. anonymous, irreversible and open to all) there needs to be no central trusted entity. And that if there is any central entity to a system, that damaging regulations (such as KYC rules) will be inserted.
justusranvier
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April 29, 2015, 05:41:57 PM
 #23226

Imagine two competing digital currencies: Bitcoin vs Andolfatto's version of FedCoin, identical except for the monetary policy part (Bitcoin is bitcoin and 1 Fedcoin = 1 USD).  Which would the free market choose?
Depends on how long they take to launch FedCoin and really get it widely deployed.

Rational actors would prefer to hold their funds in the currency with the lowest monetary inflation and only trade into the other one for the time needed to make a purchase.

In 2015 it's within the realm of possibility that some might save in FedCoin instead of Bitcoin.

It would be harder to make that case in 2020 after the third reward halving, however.
Zangelbert Bingledack
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April 29, 2015, 05:45:37 PM
 #23227

Lastly, and unrelated to the topic of who processes the payments, I liked this comment:

Quote from: David Andolfatto
Finally, the proposal for Fedcoin should in no way be construed as a backdoor attempt to legislate competing cryptocurrencies out of existence. The purpose of Fedcoin is to compete with other cryptocurrencies--to provide a property that no other cryptocurrency can offer (guaranteed exchange rate stability with the USD).

Imagine two competing digital currencies: Bitcoin vs Andolfatto's version of FedCoin, identical except for the monetary policy part (Bitcoin is bitcoin and 1 Fedcoin = 1 USD).  Which would the free market choose?

I don't see how they could be identical while maintaining the peg, unless the Fed used its financial power to buy 99.9% of the coins and continue to mine almost all of them, then sell them onto the market if the price got too high. They can raise the price if it gets too low, but they can't do anything about it being too high unless they own most of it. In which case they could save a lot of money by just doing it Ripple-style and premining almost all the coins.

Of course in that case I suspect a popular fork would arise where the Fed's balance is set to zero Cheesy Or actually, people would sell their Fedcoins off for bitcoins, insofar as they wanted an asset that couldn't be inflated at whim - same as people do now from fiat to BTC. Except now Bitcoin has the Fed's endorsement as a concept so the title of this thread will be validated in spectacular fashion. It would be an awesome result for the Bitcoin price.
Zangelbert Bingledack
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April 29, 2015, 06:19:24 PM
 #23228

Basically, if you look at all the features Bitcoin offers: uncensorable transactions, predictable and limited supply, etc. The Fed could create a halfway coin that removes some (or all) of these features. The problem is that this fails to recreate some or most of the allure Bitcoin has. The more features they remove, the more market share they leave for Bitcoin.

On the flipside, the more features they keep, the more they artificially boost the advancement of Bitcoin's goals, though not necessarily such a great outcome for current investors. The Fed trying to imitate Bitcoin at all is a humongous boon to public perception, though, which is of course good for current investors. To illustrate it concretely:

Scenario 1: The Fed just buys Bitcoin as a reserve asset.
Result: Wonderful. Bitcoin adoption is turbocharged and everyone now holding BTC becomes very wealthy.

Scenario 2: The Fed endorses a completely identical Bitcoin started with a new genesis block today.
Result: Early adopters would lose most of their investment advantage, but otherwise wonderful. Bitcoin adoption is turbocharged.

Scenario 3: The Fed creates identical Bitcoin minus limited supply (i.e., a giant premine to enable "monetary policy").
Result: Great because uncensorable online transactions are turbocharged with all that entails, yet Bitcoin retains its unique appeal as an inflation-proof asset, plus the concept has a very effective endorsement from the Fed so adoption of Bitcoin will take off as well, even if they ban Bitcoin. Whatever percentage of people choose Bitcoin vs. Fedcoin, this is a big boost overall.

Scenario 4: The Fed creates identical Bitcoin minus uncensorable transactions.
Result: Great because they still can't inflate so hard money gets turbocharged, and Bitcoin still maintains its unique appeal for uncensorable transactions. The concept has a pretty effective endorsement from the Fed so adoption of Bitcoin will take off as well even if they ban Bitcoin. Whatever percentage of people choose Bitcoin vs. Fedcoin, this is a big boost overall.

Scenario 5: The Fed creates Bitcoin with neither limited supply nor uncensorable transactions (perhaps something like Ripple)
Result: Pretty good (assuming for the sake of argument that it actually works) because global friction is reduced and it's a fairly effective endorsement of the concept of Bitcoin, while Bitcoin retains all the rest of its allure (uncensorable transactions and unmanipulable supply) and people become accustomed to dealing with digital security. Whatever percentage of people choose Bitcoin vs. Fedcoin, this is a fairly nice boost overall.

None of these scenarios end badly for Bitcoin as a movement, though Scenario 2 wouldn't make current investors happy (but it also seems quite unlikely). In fact, of these only Scenario 5 seems likely in the near term, with Scenario 1 being of course the endgame. There are bunch of variations on Scenario 5 as well that are more likely.
Peter R
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April 29, 2015, 07:20:12 PM
 #23229

Lastly, and unrelated to the topic of who processes the payments, I liked this comment:

Quote from: David Andolfatto
Finally, the proposal for Fedcoin should in no way be construed as a backdoor attempt to legislate competing cryptocurrencies out of existence. The purpose of Fedcoin is to compete with other cryptocurrencies--to provide a property that no other cryptocurrency can offer (guaranteed exchange rate stability with the USD).

Imagine two competing digital currencies: Bitcoin vs Andolfatto's version of FedCoin, identical except for the monetary policy part (Bitcoin is bitcoin and 1 Fedcoin = 1 USD).  Which would the free market choose?

I don't see how they could be identical while maintaining the peg, unless the Fed used its financial power to buy 99.9% of the coins and continue to mine almost all of them, then sell them onto the market if the price got too high. They can raise the price if it gets too low, but they can't do anything about it being too high unless they own most of it.

Imagine that the mining reward was adjustable, thereby allowing the Fed to control the security level of the ledger, and imagine that a new Coinbase-type transaction was introduced, thereby allowing the Fed to create FedCoins with just a signature.  

Here's an example of how the Fed could maintain the peg:

A USD holder could take (e.g.) 1,000,000 USD to the Fed in exchange for FedCoins.  The Fed would "create" 1,000,000 FedCoins and give them to the USD holder.  The creation of these 1,000,000 FedCoins increases the liabilities on the Fed's balance sheet by $1,000,000.  But the Fed would then destroy the 1,000,000 USD that it received, thereby simultaneously decreasing the liabilities on its balance sheet by the same amount.  The end result is that the total assets and liabilities on the Fed's balance sheet are unchanged--it's just that $1,000,000 in cash liabilities was swapped with $1,000,000 in FedCoin liabilities.  

Similarly, a holder of FedCoins could take 1,000,000 Fedcoins to the Fed in exchange for USD, and the same process would operate in reverse.  Basically, the Fed credibly maintains the peg, allowing anyone to arbitrage (risk free) any price difference between FedCoin and the USD.  After this system operates for a while, the idea that 1 FedCoin would trade at a premium or discount to 1 USD would be as silly as thinking that a $100 bill would trade at a premium or discount to 100 x $1 bills.  

In summary, FedCoin seems to require three things:

1. A adjustment in the mining rewards to some amount deemed by the Fed as sufficient to achieve security of the ledger;
2. A new Coinbase-type transaction that allows the Fed the ability to mint new coins with only its digital signature.  
3. The willingness of the Fed to freely swap USD for FedCoins and vice versa.  

Why would this not work?

I'm not suggesting that this would be an improvement over Bitcoin.  I like Bitcoin's fixed supply.  I just thought Andolfatto's idea was interesting and feasible.


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rocks
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April 29, 2015, 07:22:00 PM
 #23230

@barrysilbert says trading of $GBTC should start today or tomorrow #BitcoinConf @BitcoinTrust
https://twitter.com/InsideBitcoins/status/593489106296012800

I can't wait to see if GBTC tracks the exchanges or if there develops a significant premium/discount spread. GBTC is the first mechanism to enable accounts that purchase assets through stock exchanges to buy BTC (indirectly). There is lots of money out there that can not easily access BTC today, and GBTC opens that up.
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April 29, 2015, 07:45:19 PM
 #23231

might be old news, but I just discovered kitco updated their bitcoin market stats with a gold/bitcoin page:



(klick on image, then on "precious metals")

PGP key molecular F9B70769 fingerprint 9CDD C0D3 20F8 279F 6BE0  3F39 FC49 2362 F9B7 0769
cypherdoc
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April 29, 2015, 07:45:39 PM
 #23232

they will not be able to hold back the masses from digital, mobile currency:

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April 29, 2015, 07:51:25 PM
 #23233

I believe the Bitcoin ETN listed on Nasdaq Stockholm deserves to be mentioned in this thread. Trading will start 18th of May Smiley

http://xbtprovider.com/lang_en


Firms who can trade on Nasdaq Nordic:

http://www.nasdaqomx.com/transactions/markets/nordic/membership/membership-lists
cypherdoc
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April 29, 2015, 07:57:01 PM
 #23234

I believe the Bitcoin ETN listed on Nasdaq Stockholm deserves to be mentioned in this thread. Trading will start 18th of May Smiley

http://xbtprovider.com/lang_en


Firms who can trade on Nasdaq Nordic:

http://www.nasdaqomx.com/transactions/markets/nordic/membership/membership-lists

everybody who's anybody is on that list.
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April 29, 2015, 07:59:04 PM
 #23235

I think the water is starting to boil now. Exciting times ahead
Zangelbert Bingledack
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April 29, 2015, 08:11:50 PM
 #23236

Why would this not work?

I tend to assume it would. It just wasn't initially clear what you meant by "identical to Bitcoin" but "with a peg."

However, I'm not sure they'd feel comfortable about having China possibly incentivized to perform a 51% attack just to mess with them. The rest of the world also may not like the Fed having coinbase transaction privileges (or a massive premine, whichever way they did it), so I imagine there'd be a big fear of forking.
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April 29, 2015, 08:12:07 PM
 #23237

I think the water is starting to boil now. Exciting times ahead

i like where we stand at the moment.  at opposite ends of the respective cycles of every asset fiat-denominated.

down but not out and ready to rebound.
Peter R
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April 29, 2015, 08:39:17 PM
 #23238

The rest of the world also may not like the Fed having coinbase transaction privileges (or a massive premine, whichever way they did it), so I imagine there'd be a big fear of forking.

It's interesting how cryptocurrency forces one to rethink what one previously took for granted in terms of paper money.  The Fed has effectively had "coinbase transaction privileges" for US dollars since 1913 and yet the USD has only really "forked" in 1933, 1971, and is possibly at risk of doing so again this decade.

I agree that FedCoin has obstacles that Bitcoin neatly solves by its trustless design.  But I thought Andolfatto's article was still interesting because FedCoin probably is technically feasible and the power bestowed upon the Fed to administer it is the power the Fed already has now in terms of fiat dollars.  

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April 29, 2015, 11:18:01 PM
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Quote
I really like this utxo discussion. It's been helpful.

you're welcome.

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April 30, 2015, 12:06:39 AM
 #23240


[..]

Why would this not work?


If they take away all of anonymity, non-intervention in payments and the hard limit, there is not much left that can compete, and it will not take off.

If they take away only the hard limit, that could work for a while, because people seem to like the alleged stability of dollars, and it could be a softer transition.

In the end, it will not work, because market actors will always prefer one money type over all others, the one that is most liquid. All other money types will be marginal, and will only exist to the degree that they have some trait that is substantially better than the primary money. There is no room for a long standing balance, it will tip over to one side or the other.



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