Gold collapsing. Bitcoin UP.

[cypherdoc]

Hey Cypher, have you looked at the hashrate distribution yet today?

https://blockchain.info/pools?timespan=24hrs

nice.  ghash down to 27%.

the Nash Equilibrium in full display.

Yeah, I should have screen capped it but Discus Fish had briefly surpassed them earlier today.

who cares?  all of them take turns being the leader w/o anything ever becoming of it.

[cypherdoc]

U really think it would survive then? Power to the people! but in reality it woul dbe a big hit... but i think it would recover... just a big hit... probably signify a major top or something on the chart.

thing is, it will never happen.

Gavin and all the other devs aren't stupid enough to make such a change.  they're constantly monitoring the sentiment pulse of the community and they wouldn't even dare try to increase the 21M.  this is the advantage of an open source system.  it enforces rational, honest behavior.

[cypherdoc]

CNBC has *really* turned around on bitcoin recently:

http://video.cnbc.com/gallery/?video=3000298809&play=1

They're now talking effortlessly and seriously, and with almost no back-pedaling, about both the tech potential and price potential of bitcoin.

good find and assessment.  it really is fascinating to watch all these major players come around.  we're on our way.

[cypherdoc]

note this comparison chart btwn the Russell (purple line) and oil.  oil peaked first, followed slightly by the Russell.

things aren't well:

[cypherdoc]

it looks to me that mining would be best described as being in a Pure Strategy Nash Equilibrium - cypherdoc
Highlights are mine:

"A pure strategy Nash equilibrium is a profile of strategies such that each player’s (miner's) strategy is a best response ((results in the highest available payoff (block reward)) against the equilibrium strategies of the other players (miners).

A pure strategy Nash equilibrium only requires that the action taken by each agent (miner) be best against the actual equilibrium actions taken by the other players (miners), and not necessarily against all possible actions of the other players (miners). In other words, it's expected for some miners to be malicious.

A Nash equilibrium has the nice property that it is stable: if each player expects 'a' to be the profile of actions played, then no player (miner) has any incentive to change his or her action (no incentive to start cheating). In other words, no player (miner) regrets having played the action that he or she played in a Nash equilibrium."

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1968579

Nice. I hadn't looked at it that way but it makes perfect sense.

Nash equilibrium works well in theory, the real world is a little more messy.
Pre-mass adoption there are so many outside interests seeking bitcoin failure that there are other incentives at play.
Once there is more distribution and buy in, the full effects of the Nash Equilibrium will be much stronger than they are today.

the Nash equilibrium is a solution concept of a non-cooperative game; therefore, i think the Nash Equilibrium takes those hostile actors into account.  the minimum # of participants required to apply the theory is 2 and doesn't depend on large #'s.  what's also important for all actors to know and understand, and to know that the others know, is that the longest blockchain and the POW required to construct it is mathematically immutable. b/c we know that the hashrate of the Bitcoin Network is thousands of times larger than most of the supercomputers on Earth makes the strategical decision making of each individual actor clear; don't cheat.

Understood, I'm more referring to the folks that are the non-participants in the game.  Lest we forget these currently vastly outnumber the participants with respect to potential game resources available to them.  Game-ending scenarios are often dismissed as impossible when in fact they are merely unlikely, as are the application of non-monetary/computing power factors.  Threats to date have generally been within the game players, and Nash applies well.

In general I not only agree but the also salute the application of the principle.  

Consider however the implications if one were to throw something like stuxnet into the works or a fab level exploit into each of the main chip makers, say by coercion or covertly, and subsequently activated?  There are defenses certainly, but it would be disruptive and could be timed with other types of interference.  Unlikely but possible.  Thankfully, we are not under serious attack or opposition, but I'd still give a BTC =~ 0 a >0 p value, and Nash holds the rest in place.

we're ALL part of a Nash Equilibrium.  even the gubmints, banks, and skeptics.

when i decided to mine in 2011, i was fully aware that a non-economic attacker like a gubmint or bank could potentially screw my investment in BTC and mining equipment.  but after reading thread after thread about the theoretical basis of a 51% attack, i decided it was worth the risk and that any such attempt would fail.  that was my assessment.  all the other miners are fully aware of that potential as well, yet we all plow forward.  why?

the open source phenomenon that represents Bitcoin should shine enough light on any such potential attacker to prevent such an attack from happening.  any such attack should be temporary and able to be dealt with.  Gavin has already stated what could be done as a counter measure.  i think the attacker could even be identified through various means.

corruption and dishonest behavior likes to be hidden.  crooks don't want to be identified.  i think a gubmint or bank will make the assessment that it's too politically risky an endeavor to take on which would cost them millions (billions?) in losses, not only in dollars but in trust.  see this interesting study:

From 1961 to 1989, the Berlin Wall divided one nation into two distinct political regimes. We
exploited this natural experiment to investigate whether the socio-political context impacts
individual honesty. Using an abstract die-rolling task, we found evidence that East Germans
who were exposed to socialism cheat more than West Germans who were exposed to
capitalism. We also found that cheating was more likely to occur under circumstances of
plausible deniability. Subjects were more likely to cheat by mis-reporting the chosen side of
the die than by making up rolls altogether. These results indicate that most people are
motivated to hide their dishonesty – either from others (Hao and Houser, 2011) or from
themselves (Mazar et al., 2008).

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2457000

[thezerg]

Interesting.  Also note that the cheaters would then go and donate the money!  This eliminates an as an explanation persistent economic disadvantage (i.e. east germans needed the $ more).

"However, dividing the sample in subjects who had on average 50 percent high rolls or less and those subjects who had on average more than 50 percent high rolls (potential cheaters), we did not find any difference in donations (p=0.52)."   

[cypherdoc]

The crunch increased interest in tenders divorced from a single nation’s strength, spurring the International Monetary Fund to boost almost 10-fold the allocation of special drawing rights, a reserve asset whose value is based on a basket of currencies, and fueling demand for so-called virtual currencies, such as bitcoin.

http://www.bloomberg.com/news/2014-08-06/russia-sanctions-accelerate-risk-to-dollar-dominance.html

[cypherdoc]

Bitcoin 2.0 Fragmentation

http://www.bitblogger.net/2014/08/06/bitcoin-2-0-fragmentation/

[cypherdoc]

Chamath:  "look at the volatility of gold. and the ppl in the gold market are thousands of times dumber than the ppl in the Bitcoin ecosystem."   

https://www.youtube.com/watch?v=6AoPHNsX2x8

[cypherdoc]

movin up:

[cypherdoc]

Bank of America Near $16 Billion to $17 Billion Settlement

http://www.housingwire.com/articles/30946-bank-of-america-nears-record-rmbs-settlement#.U-Kfkuzh_A8.twitter

guess what?  no one goes to prison. can i have that job, please?

[wachtwoord]

Bank of America Near $16 Billion to $17 Billion Settlement

http://www.housingwire.com/articles/30946-bank-of-america-nears-record-rmbs-settlement#.U-Kfkuzh_A8.twitter

guess what?  no one goes to prison. can i have that job, please?

Can I be your CXO? You can replace X with any letter you'd like

[cypherdoc]

nom, nom, nom, nom

[solex]

movin up:

Cross-post because this is becoming more and more relevant to the gold vs btc story.

Who is proposing to leave the transaction cap alone (retain blocksize limit in 1MB), and why? (Where is the battle line? )

The primary argument to retain the 1MB limit is that smaller blocks helps ensure decentralization of Bitcoin. Lots of people rightly care about this.

As the average block size has increased the number of full nodes has been steadily declining. Once decentralization is lost then it is unlikely to be recovered. So this is a one-way path when changes are made which put decentralization at risk. The number of full nodes is in flux as they keep coming and going. Maybe there are about 8,000 at any one time. Ideally, this should not drop too low.  So, there is a trade-off between average block size and the number of full nodes. No one knows the whether there is a tipping point where a certain block size might suddenly cause a lot of nodes to disappear because of the volume of traffic. Consumer bandwidth is the key limiting factor.

The best way to keep blocks small is via fees, and the minimum fee was increased 1 year ago which got rid of a lot of the messaging spam which had tx volumes at >60k per day early in 2013. So fee increases have already allowed the block limit to remain longer than previously expected. The block limit has a use for its psychological effect of driving the fees market, competition for block space. The problem there is that the fees market may not work smoothly until the block reward is 6.25 or even 3.125 btc.

However, a fixed block limit is very dangerous because of the potential for ecosystem conditions to create a sudden volume spike into this bottleneck crippling transaction throughput, collapse the price and create a PR disaster which will hang like a cloud for years afterwards.

IMHO, at the very least the 1MB should increase in line with the global improvement in bandwidth speed, and should be about 3MB by now.
This can be done using block version numbers and a super-majority trigger, or the more primitive block height check. However, time is running out and it looks like the 1MB will be maxed out during Q2 2015.

[justusranvier]

The primary argument to retain the 1MB limit is that smaller blocks helps ensure decentralization of Bitcoin. Lots of people rightly care about this.

That was never a very good argument.

The 1 MB limit was originally an anti-spam measure, and since it was put in place the biggest proponents for keeping it there were altcoiners who wanted Bitcoin to stay crippled to leave room for them.

The loss of full nodes is due to a delay in the appearance of Bitcoin-native businesses. There's nothing wrong with the demands of running a full node being something that only power users/small businesses and up can handle.

[wachtwoord]

The primary argument to retain the 1MB limit is that smaller blocks helps ensure decentralization of Bitcoin. Lots of people rightly care about this.

That was never a very good argument.

The 1 MB limit was originally an anti-spam measure, and since it was put in place the biggest proponents for keeping it there were altcoiners who wanted Bitcoin to stay crippled to leave room for them.

The loss of full nodes is due to a delay in the appearance of Bitcoin-native businesses. There's nothing wrong with the demands of running a full node being something that only power users/small businesses and up can handle.

Buying space in the Blockchain (through fees) only works if the amount of available space is limited. I hope we'll quickly run into the 1 MB limit and the limit is NOT increased, then we'll see transfer fees increase. Increasing the limit is the same as printing more fiat currency, the value of space in the Blockchain will tumble towards zero and therefore the fees will too undermining the long term viability of Bitcoin.

If the limit is increased I'm going to seriously consider to reduce my investment in Bitcoin significantly. When the limit is changed once it will be changed in the future as well as this will create a precedent. It's almost as bad as outright increasing the maximum number of Bitcoins from the current 21M maximum.

[Peter R]

Cross-post because this is becoming more and more relevant to the gold vs btc story.

Here's the current chart (made today):



My prediction is that we don't deal with the blocksize limit until after we experience another growth spurt (assuming one happens).  If the Metcalfe relationship holds, it will look like the bitcoin price "bounced" off the TX limit and a credible argument could be made at that time that growth has become hindered by bandwidth.  I'm personally not worried at all about the blocksize, as I'm confident we will find very strong support to do the right thing if the need arises.

[justusranvier]

Buying space in the Blockchain (through fees) only works if the amount of available space is limited. I hope we'll quickly run into the 1 MB limit and the limit is NOT increased, then we'll see transfer fees increase. Increasing the limit is the same as printing more fiat currency, the value of space in the Blockchain will tumble towards zero and therefore the fees will too undermining the long term viability of Bitcoin.

That's FUD and historical revisionism that Jeff Garzik started spreading, for reasons about which I can only speculate.

If the limit is increased I'm going to seriously consider to reduce my investment in Bitcoin significantly. When the limit is changed once it will be changed in the future as well as this will create a precedent. It's almost as bad as outright increasing the maximum number of Bitcoins from the current 21M maximum.

When the limit is removed, I hope you do sell all your coins.

In fact, why wait?

[Peter R]

It's almost as bad as outright increasing the maximum number of Bitcoins from the current 21M maximum.

Wachtwoord, do you think the limit should be permanently set to 1 MB? Or just that it should remain "limited" in order to drive a healthy fee market?

[wachtwoord]

It's almost as bad as outright increasing the maximum number of Bitcoins from the current 21M maximum.

Wachtwoord, do you think the limit should be permanently set to 1 MB? Or just that it should remain "limited" in order to drive a healthy fee market?

I think there should be a limit otherwise no-one will pay any meaningful fees ever and people will stop mining. The system will only work when there is a limited amount of space because if it is unlimited it is advantageous for miners to include transactions with any fee, even 1 Satoshi. If that happens Bitcoin will stop to function correctly as the block rewards decrease.

Why the limit should be at 1 MB? Well the same reason the maximum amount should be at 21M Bitcoin. If it is ever increased it creates a precedent to do so again, and again and again, ad infinitum. I signed up for Bitcoin with a 21M unit cap and a 1MB block cap. Any changes to that will force me to seriously reconsider my investment as the chances of Bitcoin going to zero will increase tremendously.

If people want the limitation to be removed I hope it's published as an altcoin (Bitcoin2) and the initial distribution as proposed by you Peter will be used.