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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1806969 times)
tvbcof
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May 18, 2015, 03:48:04 AM
 #24201

...
IBLT can scale up to any amount of txns that all full nodes can coordinate via the P2P relay. I argue that at some level this becomes centralizing. ...

Someone has proposed a 'P2P relay'?  LOL!  I argue that at some level all levels this is label is an absurdity.


Don't all the big miners already use this private relay network:
 https://bitcointalk.org/index.php?topic=766190.0
?

Probably they do.  Big miners suck compared to not having big miners in a system such as Bitcoin IMO.  That was one of it's design defects.  That is entirely beside the point, though, since my comment had nothing in particular to do with Bitcoin, much less the state of Bitcoin.  My point is that 'peer-2-peer' and 'relay' are opposite constructs.

That said, with certain layers of encapsulation the phrase is a bit less absurd on it's face.  Application peering is (or can be) close enough to 'peer-2-peer' in spite of the fact that we use commercial network providers who do various kinds of switching at the transport layers.


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May 18, 2015, 03:55:46 AM
 #24202

My point is that 'peer-2-peer' and 'relay' are opposite constructs.

There is that same conceptual need for absolutism that plagues goldbugs.

Then your definition is that only a fully connected mesh topology is P2P. But we know for a fact that multifurcating physical networks are more efficient than fully connected topology. Thus P2P would be uneconomic except that we can layer the logical IP network on top of the physical network. Nevertheless similar economics apply to the logical IP network and thus no real-world P2P networks exist without relaying (propagation) because Reed's law (i.e. # of connections in fully connected topology) is exponential complexity (scaling) cost. You are asserting that Facebook would need to send every user message from any user's node to all 1 billion users' nodes in order to be P2P. Thus you might as well quality your definition of P2P to — a fully connected mesh topology that can't scale and thus doesn't exist in the real world.

Heck if the Bitcoin block announcement network was fully connected mesh, then wouldn't need IBLT because there wouldn't be his huge propagation delay problem that leads to orphans.

I rather have a more sane definition of P2P, i.e. it is not client-server. In other words, every client can communicate to another client, even through a relay. Servers don't relay rather they serve. Facebook is not relaying the message from one user to another, because the end-to-end principle is not in play (Facebook is not acting as a dumb, fungible intermediary).

Thus sorry you were entirely incorrect in your accusation.

P.S. I rather think client-server is an oxymoron and should be appropriately named servant-master.

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May 18, 2015, 04:24:33 AM
 #24203

I was going to go more abstractly into what the matter of the universe is, because I have unifying theory on that which I think will be breakthrough.

You mind is like a rare orchid blooming in a quagmire, a beautiful bird trapped in a menagerie of farm animals.  Please pay no attention to the neophytes and B-listers, nor to the effluvium discharged by their ego-driven loquaciousness.    

Now I must share with you that I was stuck recently by such an afflatus that the tenebrous nature of the universe was illuminated, as though God shone a light to the aphotic depths of cosmic understanding.  The unifying theory I pieced together from that moment is not only a breakthrough, but of such breaking breakthroughyness that it is more properly a breakthrough-n-beyond.

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Btw, my future elucidation will explain why this is required else the universe would need to have a fixed, absolute origin and edge...

Yes, beyond the figurative edge of the universe (for literately the universe must have no edge <yet I must waste valuable time to make these parenthetical remarks, for without them, the b-listers become confused in their nullibicity, opining relentlessly in their dungeons of inferiority>).  

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and thus could not exist (would collapse into an infinitesimal point), but that is not elucidation is not necessary for the point we need to discuss now.

Indeed, but I must interject: for if the universe were an infinitesimal point, and nothing beyond it exists, then would it not equally be infinite in magnitude?  Does not the measure of measures becomes sensibly nonsensical?  Unquizzically quizzical?

That is all I can muster for today, for it is with great pains that I must wade through the drudgery of the other comments in this thread.

I have said what I have come to say.  

I shall now leave this forum never to return.  
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May 18, 2015, 04:26:35 AM
 #24204

I was going to go more abstractly into what the matter of the universe is, because I have unifying theory on that which I think will be breakthrough.

You mind is like a rare orchid blooming in a quagmire, a beautiful bird trapped in a menagerie of farm animals.  Please pay no attention to the neophytes and B-listers, nor to the effluvium discharged by their ego-driven loquaciousness.    

Now I must share with you that I was stuck recently by such an afflatus that the tenebrous nature of the universe was illuminated, as though God shone a light to the aphotic depths of cosmic understanding.  The unifying theory I pieced together from that moment is not only a breakthrough, but of such breaking breakthroughyness that it is more properly a breakthrough-n-beyond.

Quote
Btw, my future elucidation will explain why this is required else the universe would need to have a fixed, absolute origin and edge...

Yes, beyond the figurative edge of the universe (for literately the universe must have no edge <yet I must waste valuable time to make these parenthetical remarks, for without them, the b-listers become confused in their nullibicity, opining relentlessly in their dungeons of inferiority>).  

Quote
and thus could not exist (would collapse into an infinitesimal point), but that is not elucidation is not necessary for the point we need to discuss now.

Indeed, but I must interject: for if the universe were an infinitesimal point, and nothing beyond it exists, then would it not equally be infinite in magnitude?  Does not the measure of measures becomes sensibly nonsensical?  Unquizzically quizzical?

That is all I can muster for today, for it is with great pains that I must wade through the drudgery of the other comments in this thread.

I have said what I have come to say.  

I shall now leave this forum never to return.  

Another Anonymint alt?
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May 18, 2015, 05:14:04 AM
 #24205

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and thus could not exist (would collapse into an infinitesimal point), but that is not elucidation is not necessary for the point we need to discuss now.

Indeed, but I must interject: for if the universe were an infinitesimal point, and nothing beyond it exists, then would it not equally be infinite in magnitude?  Does not the measure of measures becomes sensibly nonsensical?  Unquizzically quizzical?

That duality between infinitesimal and infinite extent is the ultimate (unreachable, asymptotic) end of the trend of entropy to 0 (and imperceptibly infinite simultaneously), yet without friction we would be there instantly and the universe would be featureless (and imperceptible, infinitely diverse). Thus we wouldn't exist in terms of our perception. Spacetime is a convincing illusion created by perception (i.e. existence). We exist because we perceive we do. Without friction, we could not perceive.

Kudos on the lexicomanic, grandiloquent, glottologist attempt and sesquipedalian prose.

I refer to perception and existence in the spacetime domain. Analogous points can be made on any analogous domain.

Yes, beyond the figurative edge of the universe (for literately the universe must have no edge

Your tautology is (a case applicable to Gödel's incompleteness theorem because it is) an assumption of the absence of an outside observer. If you define the universe according that to assumption, then you assume God can't exist, but yet you can't falsify that assumption and thus you violate the fundamental tenet of science.

Another way to conceptualize Gödel's incompleteness theorem is a relativistic system can't falsify that an absolute point doesn't exist. Thus any set of claims that attempt to be absolute (complete) will be incorrect (inconsistent).

This is why any program run on a Turing-complete machine (i.e. unbounded recursion) can't be proven to halt, for this would be both universally (because the entropy is unbounded) complete and consistent.


Another Anonymint alt?

Was there a prior one I didn't know I created?

tvbcof
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May 18, 2015, 05:43:23 AM
 #24206

My point is that 'peer-2-peer' and 'relay' are opposite constructs.
...  You are asserting that Facebook would need to send every user message from any user's node to all 1 billion users' nodes in order to be P2P. Thus you might as well quality your definition of P2P to — a fully connected mesh topology that can't scale and thus doesn't exist in the real world.
...

No shit.

I'm not asserting anything about Facebook.  I don't give a fuck about Facebook or almost any like entity.  One of the few thing Bitcoin has (or had) vs. the competition was peer-2-peer function which is highly important in a situation where censorship and interference is a real threat that users may wish to guard against, and it would be ignorant not to anticipate these threats should Bitcoin ever pose a real threat to the modern banking system and/or state sponsored fiat solutions. To throw it away in order to make it 'scale'. which is a problem already solved by a zillion other competitors, is silly to me.  This particularly because Bitcoin has a lot of natural deficiencies against established (and theoretcal) solutions which will almost certainly make it noncompetitive in this sphere.

As always, my solution would be to leverage those aspects of the Bitcoin solution which it already rules at, and P2P and related security and robustness is chief among these.  If Bitcoin served as a backing store behind sidechains or other such solutions not only could it retain it's initial advantages but the resulting solution set would be even stronger and reach a wider userbase with tuned solutions anyway.


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May 18, 2015, 05:48:41 AM
 #24207

My point is that 'peer-2-peer' and 'relay' are opposite constructs.
...  You are asserting that Facebook would need to send every user message from any user's node to all 1 billion users' nodes in order to be P2P. Thus you might as well quality your definition of P2P to — a fully connected mesh topology that can't scale and thus doesn't exist in the real world.
...

No shit.

I'm not asserting anything about Facebook.  I don't give a fuck about Facebook or almost any like entity.  One of the few thing Bitcoin has (or had) vs. the competition was peer-2-peer function which is highly important in a situation where censorship and interference is a real threat that users may wish to guard against, and it would be ignorant not to anticipate these threats should Bitcoin ever pose a real threat to the modern banking system and/or state sponsored fiat solutions. To throw it away in order to make it 'scale'. which is a problem already solved by a zillion other competitors, is silly to me.  This particularly because Bitcoin has a lot of natural deficiencies against established (and theoretcal) solutions which will almost certainly make it noncompetitive in this sphere.

As always, my solution would be to leverage those aspects of the Bitcoin solution which it already rules at, and P2P and related security and robustness is chief among these.  If Bitcoin served as a backing store behind sidechains or other such solutions not only could it retain it's initial advantages but the resulting solution set would be even stronger and reach a wider userbase with tuned solutions anyway.

If it was "no shit" then you would have never criticized me for stating the propagation of information was a P2P relay. Is that your way of saying "mea culpa"?

So what was your point? Did I make an assertion that P2P was undesired?

I only asserted that being P2P on propagation of information doesn't mean that the design of the system is P2P. I assert that the move to IBLT for new block announcements makes the system centralized and the P2P propagation becomes an irrelevant appendage w.r.t. to whether the system is P2P.

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May 18, 2015, 06:24:08 AM
 #24208

it's really too bad that the anti-increase 1MB core dev crowd can't understand the concept that tx fees and block size limits should in fact be settled by economic market forces.  if anything, the myriad of technicals proposals flying around that ignore these economics is evidence to this confusion.

Coders gonna code. But I think it's too much to say they're ignoring the economics. I think a lot of them simply prefer a technical solution because it is more tractable/knowable/familiar to them. They may acknowledge that the market may make everything work out in the end, but they don't see it as their position to jump into the unknown like that, or at least to support that idea ("the nail that sticks out gets hammered down" - if bad stuff happens, they get the blame if they were the one supporting an idea that is perceived as not being appropriately conservative).
There's a real need for comprehensive Bitcoin-specific economic education.

The Satoshi Nakamoto institute could have filled that role, but it doesn''t look like they are able or willing.
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May 18, 2015, 08:57:32 AM
 #24209

There's a real need for comprehensive Bitcoin-specific economic education.

The Satoshi Nakamoto institute could have filled that role, but it doesn''t look like they are able or willing.

We're doing our part here and elsewhere. A systematic guide would be very nice, though I think people do pick up the key ideas with enough exposure via high-visibility forum/reddit posts. I've seen many come around over the months and years. A comprehensive education project would certainly speed up that process.
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May 18, 2015, 09:41:59 AM
 #24210

There's a real need for comprehensive Bitcoin-specific economic education.

The Satoshi Nakamoto institute could have filled that role, but it doesn''t look like they are able or willing.

We're doing our part here and elsewhere. A systematic guide would be very nice, though I think people do pick up the key ideas with enough exposure via high-visibility forum/reddit posts. I've seen many come around over the months and years. A comprehensive education project would certainly speed up that process.

Bitcoin specific economic education would be cursed with the same desinformation to the same degree as other economics, and main stream media babble. But no problem, add to the melting pot if you can. In the end, the good information will trump the bad (maybe that is just hope).
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May 18, 2015, 09:58:35 AM
 #24211

The nice thing is we now have this wonderful market mechanism for separating the wheat from the chaff in economic theory. And once prediction markets arise, this mechanism will become even more powerful and with far-reaching implications.
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May 18, 2015, 10:10:35 AM
 #24212

If the float is small then the bid/ask can moved with a very small proportion of the market cap.

I don't think Pruden is oblivious of this, his IQ is in my understanding about half way between us two (and even I undestand it Wink ).

Yes. "Free float" matters, and transaction costs (the largest being inflation tax aka "capital gains tax") are the main driver reducing the free float.

In everything except pegged assets, the wealth effect both in appreciation and depreciation of the asset is great.

My post as regards to the possible transition from Bitcoin to a fungible cryptocurrency posits that only 10-25% of the value currently stored in Bitcoin can be migrated to the contender coin, because as this happens, it causes both a negative wealth effect where the rest of the bitcoins lose the bulk of their value, and a positive wealth effect where the contender coins increase in value. The result is that the value which belonged to the majority of the original bitcoin holders is invisibly transferred to the early minority who correctly guessed the transition and acted accordingly.

Yes I know the regulars in this thread do not like to even think this way, but hey - that is the same mechanism that transferred the value from outside world to Bitcoin after we bought it in 2010-2011 and up to 2013! The net new demand cash flow that lifted BTC from $1 to $32 for example, was likely only about 5% of the corresponding increase in the market cap (even the total trade volume in Mt.Gox during the period was only a small fraction of the increase in marketcap).

The changes in world capital base are rather slow. Even a huge financial bust is not destroying capital that much. What mainly happens is that the imaginary capital is written off as malinvestment (in reality it was destroyed during the boom already) and asset values take a hit, but the earning capacity of the current assets (here: not meaning liquid assets, but assets that are solid and needed) stays intact, or even increases as the excess capacity is purged out. The IRR of the assets increases in proportion to the decrease of their valuation, as the IRR is defined as annual_profit : valuation.

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Bond markets rarely if never go from $50 trillion "market cap" to "no ask" instantly.

(You probably meant no bid.) And besides they do: I was quite close to follow the shtf in Sept-Oct 2008, when mutual funds closed the redemption window as there was no bid for their assets, and consequently no way to calculate the daily value, nor liquidity obtainable to process the redemptions.

Bonds are precarious, as they are not really assets, they are obligations. Whereas the assets are more or less indestructible, and seldom go to zero in value, the obligations may be defaulted easily, and as is the case of sovereign bonds, they are backed by nothing much of value except the enslavement of the people of that country, and in my observation the young generation up to the people in their 40s-50s do not feel much sympathy to the idea that they would be forever slaves of the system for debts that they neither contracted nor enjoyed. Sure TPTB is headed to expropriate all physical wealth under the color that the governments owe them unrepayable amounts of database entries, but this resource grab is so out of whack in relation to global consciousness and fairness that it is not easily done. They need the consent of the sheep at minimum to do it, but otoh the population of sheep (the boomers) will soon experience a rapid decline due to the reason that TPTB is killing them via the big pharma! Wink So it's not going to be easy.

And even if they manage to continue along these lines, they cannot easily destroy the knowledge capital which anyway grows every year, keeping the population's share of the total capital high.

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capital flows into the USA will have no where also to go! because the investors won't have the knowledge or options and the capital is finally realized as destroyed).

I hope you realize Pruden's point that what you call "capital" here is "liquidity" and that is not affected by changes in asset values, rather it is diametrically the opposite: rising liquidity causes the fall of interest rates and they both cause the rise in asset values and vice versa.

The coming bond malaise is most basically explained by this simple way: the world is loaded to the hilt with bad debt; the least productive members of the society (governments, frothy business and homeowners) are indebted far in excess to their assets or productive capacity, whereas the most productive (solid businesses, TPTB, savers and knowledge nomads) are the creditors. Cyprus example showed that TPTB is easily able to get away with stealing from the creditors in case the push comes to shove, while retaining the debtors in their grip. While I have always asserted that going into debt is stupid, holding debt is if possible an even worse proposition in the coming years. TPTB is screwing you as surely as they are grabbing the assets of the debtors. The bonds regime is a racket, charade, fraud and scam.

(The debtors are already their slaves, so the strategic thinking goes along the lines how to enslave you)  Cheesy

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So relatively the knowledgeable capital—that can flow out of bonds into gold and crypto—is immense.

My bold 2013 prediction for forward escape and bitcoin singularity (the collapse of fiat and bonds, leaving only the CB's printing money to prop up their market in hyperinflation, and the printed money chasing bitcoin prices up to unfathomable heights denominated in currency, and quite high in purchasing power as well  - it is already the case that CB's buy all the new bond issuance as there is no sane market actor doing it with their own money!) was just a few years early. With the developments in Bitcoin in the last 2 years with TPTB buying clandestinely with both hands and enacting draconian regulation in this 100% transparent chain, I have more confidence than ever to the scenario becoming true soon.

They are trying to use it for entrapment of the value to a thing they can control to a larger extent even than the present assets. For this reason diversifying to the private cryptocurrencies now is very prudent. Armstrong's model forecasts that the private assets will enjoy in the coming years, and that includes Bitcoin only to the point that it is perceived as a private asset. Unfortunately in my thinking it is strongly entrenched in a slide to not being one in the years to come.

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[1] Note Fekete was the one who taught me that gold is used as a store-of-value because it has very high stocks-to-flows ratio.

To me as well. But confidence in gold was formed during millennia, cryptos have quite a game ahead for gaining the same level of confidence, because low inflation == premine, and there is no question that all the cryptos that exist have far too much tilted to gaining the low inflation too early, and attempting to make a huge value grab to early adopters. Despite its infancy, I dare to say that CKG is the most level-headed attempt at correcting the flawed economic thinking in cryptocurrency issuance.

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May 18, 2015, 10:26:03 AM
 #24213

On forkability in general, I see it as a great strength, not a weakness. It means that the economic majority is always in control even when major changes have to be made.

As a side note, I find it cumbersome during deeper analysis to think in terms of "Bitcoin." Rather, I think more fluidly in terms of the economic majority ledger (currently known as the Bitcoin ledger). Forking the protocol is largely powerless* to affect the economic majority ledger, because - by the same logic as in my previous two posts - the new protocol fork only retains control of the economic majority ledger to the extent that the protocol change is compelling to the economic majority.**

Since every differentiated protocol fork (here I mean altcoins) has so far created an entirely new ledger, of course they aren't very compelling to the economic majority, receiving at most tepid investment interest. A spin-off would be based on the economic majority ledger, so it would have a great advantage over an altledger/altcoin, though if it wasn't compelling it would just be sold off by bitcoin holders for more bitcoins.

If a substantially different protocol fork or spin-off is ever more compelling to the economic majority, and of course using the same ledger is the first requirement for that, it would be adopted. The economic majority retains their ledger with their wealth in all cases. Bitcoin-the-protocol may be no more, but the ledger stays so bitcoin holders have nothing to fear except a re-naming.

Suppose a substantial segment of the economic majority shows interest in some change you find repulsive. Likely many others will agree with you, so in some unlikely scenarios you will potentially have two ledgers form over time.** If this does occur, it's the most amazing form of democracy (not voice democracy, but exit democracy) because everyone can use the system they want without compromise. However, again, there is a strong tendency to simply converge on ideal money based on the wisdom of (investing) crowds.

For instance, if we suppose a substantial segment of the economic majority shows interest FedCoin, then the legal situation may make it likely that the two coexist, with Bitcoin either on the black market in that country or competing directly with FedCoin. In that case, again, exit-democracy prevails and the Feds have no more tools to corrupt cryptocurrency than they do now (see the arguments in my two previous posts).

Here's another important implication of thinking in terms of the economic majority ledger: Bitcoin issuance is not limited to 21 million coins because of the protocol, but because of the exit-democratic consensus of the economic majority. It is incorrect to say we have moved from an era of control by central bankers to an era of control by mathematics. We have moved to an era of control by the economic majority.

This is a great advance, but not because "no one" can change the protocol, but because no one can force any group of people to stop using it. To effectively change the coin limit, you have to either convince the economic majority to do so, which is a herculean task, or convince some subset of the economic majority - but then that doesn't affect the rest of the people. That means the coin limit could change (for example, in 50 years to deal with mining incentives), but not without a reason that is so incredibly compelling that it sways all or most of the economic majority - in which case the typical bitcoiner should probably not worry, despite how bad it sounds, because the economic majority has those same reservations to overcome. And also we know that the change wouldn't allow for any net-harmful degree of continuing inflation or other effects, because the wisdom of the economic majority would be behind it.***

This is the kind of guarantee Bitcoin provides; it's essentially a decentralized governance where voice vs. exit is fully exercised at all times. What Bitcoin provides is not a guarantee by code or math, rather code and math are what enforce the "edicts" of this decentralized governance structure subject to the continual pressures of voice and exit backed by investment flows.

If, for example, the economic majority believes that increasing max_blocksize to 20MB or shorter block times or Turing completeness will make the protocol for updating the economic majority ledger more compelling, a fork incorporating these changes would thrive and beat out the Bitcoin Classic protocol.

So to me, all that's required for Bitcoin-the-ledger to survive in perpetuity and make every investor rich is for the protocol to be upgraded if and only if the economic majority deems it truly compelling, with all the prudence about viability that that entails. Forking makes that happen, giving that critical exit option to balance voice, which in Bitcoin is already vastly superior to government democracy voice since it's backed by actual money.

*So far around 90% powerless, considering the combined market cap of all the altledgers compared to the economic majority ledger (Bitcoin).

**Although some kind of 50/50 or 40/60 split could happen in theory, the incentives involved make it seem unlikely in practice - and even if it does happen (because both forks are highly compelling in their own right), the market can only support a few such splits because there are only so many protocol feature sets to compete on through differentiation.

***If you're skeptical of the wisdom of the economic majority, first realize this is what controls Bitcoin right now, in fact, as is the theme of this post. Secondly realize this is as good as it gets; there is no way to create a system smarter than the economic majority, at least not without centralization (and in my opinion not even then). Third, if you're convinced that prediction markets are a huge deal, this should be appealing for the same reasons. If you're not sold on prediction markets, read the five numbered documents here. Although Truthcoin may be a misguided system, Paul Sztorc's arguments on the importance of prediction markets are impressive.

A great post deserving a rare full quote.

However,

I have seen the light concerning the wealth effects, which in my understanding alters your incentive structure.

- The voice requires at minimum a 51% majority and in practice an economic supermajority. If this is achieved, the value is retained in the majority ledger by popular consent.

- The exit requires as little as 10% selling their coins in the previous majority ledger, which effects a huge decrease in the value of the remaining coins there due to the negative wealth effect, while increasing the value of their new ledger by approximately the equivalent amount of positive wealth effect. Thus the small minority of the "rogues" can enrich themselves in the expense of the majority by so doing, creating a new majority ledger in terms of marketcap.

Very much interested in hearing rebuttals which take into account the human psychology and stay on the ground of voluntarism Wink

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May 18, 2015, 12:25:16 PM
 #24214

Very much interested in hearing rebuttals which take into account the human psychology and stay on the ground of voluntarism Wink

Unifying two topics here.
A hard fork is in some ways akin to the creation of a new alt.  A difference being that it happening fairly rapidly where one of the chains typically survives at the expense of the other.

Rare events such as a hard fork are edge cases wherein unique opportunities for mischief present themselves.  Some of these are fairly obvious others are less obvious.  Certainly there are ways to amplify an economic attack through various types of DDoS as has been often done in the past.  These should be well and fully anticipated, especially by exchanges, and most especially by exchanges that may deal with both forks.

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May 18, 2015, 01:12:55 PM
 #24215

- The exit requires as little as 10% selling their coins in the previous majority ledger, which effects a huge decrease in the value of the remaining coins there due to the negative wealth effect, while increasing the value of their new ledger by approximately the equivalent amount of positive wealth effect. Thus the small minority of the "rogues" can enrich themselves in the expense of the majority by so doing, creating a new majority ledger in terms of marketcap.

Very much interested in hearing rebuttals which take into account the human psychology and stay on the ground of voluntarism Wink

If your main point is how few "rogues" (~10%) it takes to switch to a new majority ledger, I think you may be neglecting the arbitrage opportunities that would create. Arbitrage seems to undo the cascade effect of the small exchange float, with arbitrageurs profiting from that market inefficiency.

That is, if the scenario is such that 10% of investors are motivated to switch their portfolio allocations (whether slowly or quickly), then by hypothesis the remaining 90% are not motivated to change their portfolio allocations. But the actions of the 10% result in the portfolios of the 90% changing anyway, against their will.

For example, suppose the 90% only wanted to hold a "tiny bit" of their crypto-wealth as LTC and all the rest as BTC, but now the ongoing price change has left them with say "5x a tiny bit" of LTC and a little less BTC.

Insofar as the 90% are mostly strong hands,* not price chasers, they will react by bringing their portfolios back in line. That means they will do the opposite to what the 10% are doing, but with 9x the force: sell their allocations in the minority ledger, now for a giant premium, and buy more BTC at these cheap prices. I believe this negates the "small float" issues of having only a tiny amount of each coin available on exchange at any one time (not to mention that when prices move drastically a lot of coins [and fiat] come out of hiding).

In the end it seems like the price will balance out as one would expect, with the market cap of the new ledger being about 10% that of the Bitcoin ledger, as I think Litecoin once was. The price will of course overshoot to the downside temporarily depending on how fast the switch happens and how weak the average hands are (but exhausting the coins on exchange and thereby bringing coins out of hiding means awakening the Smaug-level strong hands). And any overshoot is yet a further opportunity for arbitrage to further entrench the majority ledger investors who have the strongest hands.

So I tend to think "it all boils down to normalcy" with this one. That is, 10% switching just means 10% switching. If they switched to Litecoin, for example, that would put its market cap at something like 10-15% of Bitcoin's, and for lesser-valued coins a bit closer to 10%.

*Which is one of the nice things about having a mature ledger that has used years of extreme volatility to throw all but the strongest hands off the bronco
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May 18, 2015, 02:09:58 PM
 #24216

- The exit requires as little as 10% selling their coins in the previous majority ledger, which effects a huge decrease in the value of the remaining coins there due to the negative wealth effect, while increasing the value of their new ledger by approximately the equivalent amount of positive wealth effect. Thus the small minority of the "rogues" can enrich themselves in the expense of the majority by so doing, creating a new majority ledger in terms of marketcap.

Very much interested in hearing rebuttals which take into account the human psychology and stay on the ground of voluntarism Wink

If your main point is how few "rogues" (~10%) it takes to switch to a new majority ledger, I think you may be neglecting the arbitrage opportunities that would create. Arbitrage seems to undo the cascade effect of the small exchange float, with arbitrageurs profiting from that market inefficiency.

That is, if the scenario is such that 10% of investors are motivated to switch their portfolio allocations (whether slowly or quickly), then by hypothesis the remaining 90% are not motivated to change their portfolio allocations. But the actions of the 10% result in the portfolios of the 90% changing anyway, against their will.

For example, suppose the 90% only wanted to hold a "tiny bit" of their crypto-wealth as LTC and all the rest as BTC, but now the ongoing price change has left them with say "5x a tiny bit" of LTC and a little less BTC.

Insofar as the 90% are mostly strong hands,* not price chasers, they will react by bringing their portfolios back in line. That means they will do the opposite to what the 10% are doing, but with 9x the force: sell their allocations in the minority ledger, now for a giant premium, and buy more BTC at these cheap prices. I believe this negates the "small float" issues of having only a tiny amount of each coin available on exchange at any one time (not to mention that when prices move drastically a lot of coins [and fiat] come out of hiding).

In the end it seems like the price will balance out as one would expect, with the market cap of the new ledger being about 10% that of the Bitcoin ledger, as I think Litecoin once was. The price will of course overshoot to the downside temporarily depending on how fast the switch happens and how weak the average hands are (but exhausting the coins on exchange and thereby bringing coins out of hiding means awakening the Smaug-level strong hands). And any overshoot is yet a further opportunity for arbitrage to further entrench the majority ledger investors who have the strongest hands.

So I tend to think "it all boils down to normalcy" with this one. That is, 10% switching just means 10% switching. If they switched to Litecoin, for example, that would put its market cap at something like 10-15% of Bitcoin's, and for lesser-valued coins a bit closer to 10%.

*Which is one of the nice things about having a mature ledger that has used years of extreme volatility to throw all but the strongest hands off the bronco

I'm glad some people around here have the good foresight to save their quality posts. Those were 2 good walks back in time. I completely agree but don't have as much time nor energy to express it.
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May 18, 2015, 03:16:55 PM
 #24217

http://www.openbitcoinprivacyproject.org/2015/05/spring-2015-wallet-privacy-rating-report/
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May 18, 2015, 03:25:06 PM
 #24218

Arbitrage seems to undo the cascade effect of the small exchange float, with arbitrageurs profiting from that market inefficiency.

That is, ...he actions of the 10% result in the portfolios of the 90% changing anyway, against their will.

...the 90% ...will react by bringing their portfolios back in line. That means they will do the opposite to what the 10% are doing, but with 9x the force: sell their allocations in the minority ledger, now for a giant premium, and buy more BTC at these cheap prices. I believe this negates the "small float" issues

That dynamic requires that one can  (and is willing to!) short the small chain.  You can not sell what you do not have and can not borrow.

I would also caution against a false premise of external flow.  There is no triangular arbitrage outside.  Direct flows between fiat and non-bitcoin crypto are negligible.   First order, all flows into and out of alternative chains are fully encapsulated in bitcoin, and thus leave the debt/bitcoin ratio unchanged.  All the triangular arbitrage is denominated in crypto.


Give a man a fish and he eats for a day.  Give a man a Poisson distribution and he eats at random times independent of one another, at a constant known rate.
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May 18, 2015, 04:24:16 PM
 #24219

That dynamic requires that one can  (and is willing to!) short the small chain.  You can not sell what you do not have and can not borrow.

My sense is that most of the investors in the more promising altcoins like Monero are Bitcoin investors as well, who, like rpietila also are strongly weighted toward Bitcoin but have just a bit in an alt or two. I don't see how the top altcoins can have anywhere near their current market caps without simply being side investments by bitcoiners who are hedging against that possibility at the rates revealed in their market cap ratios to Bitcoin. "At the rates" is the key aspect. Why suddenly change your portfolio without a fundamental reason?

However, even if this isn't the case, what you're saying can only really hold true if most altcoin investors are single-coin investors. Because if they invest in, say, 50% Litecoin and 50% Dogecoin, why should they allow their portfolio to go to 90% LTC and 10% Doge, for example, as people rush into Litecoin for no fundamental reason? Their portfolio weighting already suggests they are happy with their bets, so why would they allow them to be changed? They should be selling LTC and buying Doge to maintain their weighting as they wanted it. Therefore the 10% "rogues" also empower their own altcoin competitors.

And in the end, even if you don't short or sell the altcoin at all, its holders are of course much weaker hands than typical BTC holders, so there should be a lot more selling on the way up. If it's a mined coin, also, the inflation rate tamps the price back down as mined coins flow into the system, just like Bitcoin in 2014. (Monero most especially because of its fast inflation rate.)

Maybe an unstated premise is that a temporary situations of an altcoin having a high "market cap" compared to Bitcoin would cause everyone to flood into that coin. I don't see that at all. Again, BTC holders tend to be Smaug-like strong hands, not price chasers. Plus, where are you going to get this sudden burst of an entire 10% of BTC holders changing their minds? If it's too slow, remember, it fails to sweep the thin markets. And even if it were somehow coordinated to deliberately spike the market cap on the thin exchanges, most of these people are going to lose horribly to slippage.

Overall I just don't see it. 10% is basically 10%. People don't switch their trust affiliations fast enough, and track records don't develop fast enough. I only see this as possibly being able to have some short-term psychological impact at the margins, in a hypothetical situation where the altcoin was already right about to take over anyway.

But if that situation ever looked plausible, it's spin-off time ♪ Grin
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May 18, 2015, 04:28:31 PM
 #24220


good work Justus.  kudos to the others as well.

projects like this will increase pressure to keep privacy innovations coming.
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