The BTC price is too high for it's current security model

[r0ach]

That said, you seem to see the situation rather binary:
For one, the largest pools that could in principle collude in an attack have shown absolutely no sign of interest in doing so.

You're basically saying the so called "distributed trustless system" of Bitcoin relies entirely on trusting 1-3 guys.  This is obviously not a valid security model.  What is my personal definition of when a PoW network is secure?  If it relies on pools, I would say most likely never.  Best case scenario, secure temporarily over a brief period of time.  The sheer amount of attack vectors for pools renders the entire model nonfunctional.

PoW in current form, with pool mining, is an obvious dead end.  It's excellent for distribution (i.e. before an ASIC is created), but useless for anything else.  The only solution I see to move forward out of this already failed model, is to utilize proof of stake and introduce the variable of reputation to fix most of proof of stake's current issues, such as having no finite resource in the system, the root of most of stake's problems.

If someone is going to claim I'm wrong, then I hope you have some kind of method for enforcing p2pool for PoW at the protocol level?  And can defeat share withholding attack at the same time?  I'm going to try to move forward instead with the other system I described.  The current system is a complete dead end.

I have created a TLDR version of my post:

[nwfella]

The new coins coming in everyday is clearly a major factor which prevents price rise and is costly for existing holders. All those in charge have also got big mining investments so they will not like to hear this.

Saw there were some initiatives on creating an exact chain as Bitcoin with some form of PoS. While it is impossible for it to happen now, things might change in a couple of years.

Yup.  Know a couple of people that are sweating the fact that these types of changes are even being discussed at any level.  Pretty funny the parallels between massive mining operations and the central banks they where meant to conquer.

[raid_n]

If someone is going to claim I'm wrong, then I hope you have some kind of method for enforcing p2pool for PoW at the protocol level?  And can defeat share withholding attack at the same time?  I'm going to try to move forward instead with the other system I described.  The current system is a complete dead end.

You are greatly exaggerating the problems of PoW.

In a blockchain type of probabilistic distributed consensus you can do the following attack:

1) erase transactions by creating a longer chain that does not include them.

All issues derive from this such as double spending or preventing any transactions at all.

The number blocks on top of a particular block give you some form of confidence on the stability of that block.
With a 51% attack you can deterministically change the blockchain (make a new chain that is longer) while attacks < 50% only have a certain probability of being successful.

PoS depends greatly on how random the minting process is (PoW has an element of randomness to it and this is crucial) or else you have a problem.
If I can split my stakes in a way that guarantees me to be chosen for block minting for x blocks in a row I can attempt attacks.
Of course I need 51% of the stakes to deterministically change the chain.

The mixed mining/staking approach by peercoin is actually a good compromise in this regards. The mining introduces randomness for choosing the next minting candidate.

I'm also unsure what you mean by adding reputation to PoS? So if someone tries to double spend you penalize them? that would be a huge problem because these coins would be worth less.
What happens when you move penalized coins to untainted ones etc?

[giveBTCpls]

Well most of my non geeky friends have lost interest in Bitcoin beyond being something that would deliver more fiat money to use for mall shopping and going traveling, they just want a nice extra on their shitty situation (mine is shitty too) if it doesnt improve their life quality they get bored with it.

[CoinsCoinsEverywhere]

Well most of my non geeky friends have lost interest in Bitcoin beyond being something that would deliver more fiat money to use for mall shopping and going traveling, they just want a nice extra on their shitty situation (mine is shitty too) if it doesnt improve their life quality they get bored with it.

A lot of people may be starting to give up on bitcoin now that it's lost some of its novelty.  Price stability may cause problems, too, as a lot of people are looking for the next bubble.  If it doesn't happen soon, more people may stop caring.

[CoinsCoinsEverywhere]

The new coins coming in everyday is clearly a major factor which prevents price rise and is costly for existing holders. All those in charge have also got big mining investments so they will not like to hear this.

Saw there were some initiatives on creating an exact chain as Bitcoin with some form of PoS. While it is impossible for it to happen now, things might change in a couple of years.

Yup.  Know a couple of people that are sweating the fact that these types of changes are even being discussed at any level.  Pretty funny the parallels between massive mining operations and the central banks they where meant to conquer.

Why would people who are mining now care about this?  Most of their equipment will be obsolete in a few months anyway.  If it looks like bitcoin is seriously starting to move in that direction, then just get out of the mining business.

[oda.krell]

That said, you seem to see the situation rather binary:
For one, the largest pools that could in principle collude in an attack have shown absolutely no sign of interest in doing so.

[blah]

Way to butcher my argument...

Carry on without me then.

[r0ach]

PoS depends greatly on how random the minting process is (PoW has an element of randomness to it and this is crucial) or else you have a problem.
If I can split my stakes in a way that guarantees me to be chosen for block minting for x blocks in a row I can attempt attacks.

Stake models are not required for coin weight to equal network control.  A finite variable is needed in the system for it to function, but it doesn't have to be coin age, coin weight, or any of the variables that have already been attempted.  Models already exist like this, such as BitsharesX, that use other variables (reputation), although I consider their system completely broken for numerous reasons, a few listed below.  

The current Bitcoin model is already an obvious failure while people walk around in a delusional state pretending it isn't.  It's advertised as requiring "no trusted 3rd parties", yet the entire thing relies on them in the form of a small number of mining pools for block verification.  Since Bitcoin never solved the "no trusted 3rd parties" dilemma, it's time to admit that and come up with a solution, most likely assign a performance metric to regulate those parties (i.e. PoS with reputation variable).

Unless every single iota of Bitcoin dev manpower is redirected towards the solitary goal of getting rid of mining pools, they're operating under the textbook definition of insanity.

Bitshares did it in an extremely poorly designed way by having an IPO where it's possible for the dev to to create thousands of mule accounts, send BTC in with all of them, get infinite premine + all his money back, then have plutocratic voting to determine delegates based on who owns the most coins afterwards.  The entire thing is a train wreck.  You can't get rid of mining for distribution, amongst numerous other changes they would have to do for how their system works to make it not a blatant scam.

[smooth]

Maybe its the reason why bitcoin is 600, not above 5k.

I guess that's why they're called speculators.  People make the assumption, or gamble, that these problems will be solved, or don't know the problems exist in the first place.  

I think you totally misunderstood the post. His point, I think, is that Bitcoin's price is not "too high" but is actually very low due to the problems you identify.

Perhaps if it hadn't failed on distributed mining, the price by now would be $5000 with a market cap of $60 billion. That is still a tiny number compared to what one expects for a widely adopted currency, so lack of full global adoption (yet) is hardly incompatible with a $5000 price.

It may be that people (meaning people at large, not just bitcoin developers or supporters) in fact aren't ignoring the problems you point out, but actually see them as a reason to be skeptical about it, therefore greatly depressing the price.

If you assume a future price of $100K for hypothetical global adoption, the current price implies a probability of 0.6% of success. You may well agree with the market on this.

[raid_n]

PoS depends greatly on how random the minting process is (PoW has an element of randomness to it and this is crucial) or else you have a problem.
If I can split my stakes in a way that guarantees me to be chosen for block minting for x blocks in a row I can attempt attacks.

Stake models are not required for coin weight to equal network control.  A finite variable is needed in the system for it to function, but it doesn't have to be coin age, coin weight, or any of the variables that have already been attempted.  Models already exist like this, such as BitsharesX, that use other variables (reputation), although I consider their system completely broken for numerous reasons, a few listed below.  

The current Bitcoin model is already an obvious failure while people walk around in a delusional state pretending it isn't.  It's advertised as requiring "no trusted 3rd parties", yet the entire thing relies on them in the form of a small number of mining pools for block verification.  Since Bitcoin never solved the "no trusted 3rd parties" dilemma, it's time to admit that and come up with a solution, most likely assign a performance metric to regulate those parties (i.e. PoS with reputation variable).

Unless every single iota of Bitcoin dev manpower is redirected towards the solitary goal of getting rid of mining pools, they're operating under the textbook definition of insanity.

I don't want to be rude here but it appears to me that you have very little knowledge and understanding of how probabilistic distributed consensus through the blockchain works.

"Stake models are not required for coin weight to equal network control"

What are you trying to say here? Coin weight in a Proof of Stake type model only deterministically gives you control if you own more than 50% of the coins.
From an economic perspective yes, if you own a lot of something you might be able to assert more control over it. But please enlighten me where coin weight equals network control in a model
where those coins do not directly influence the creation of new blocks or somehow restrict transactions.

"A finite variable is needed in the system for it to function, but it doesn't have to be coin age, coin weight, or any of the variables that have already been attempted."

Yes a finite resource is desirable for a blockchain type method of consensus. In the original whitepaper satoshi points out why using network addresses is not a great idea and that using processing power
as a finite resource makes sense. If you do not require this finite resource the entire mechanism boils down to who is the quickest at producing the most blocks and disseminating them (actually such a system would still be valid but for obvious reasons it makes little sense to want it).

"The current Bitcoin model is already an obvious failure while people walk around in a delusional state pretending it isn't"

No it isn't. I do not understand why you think that the network needs maximum distribution of mining/minting to be secure.
Block height on top of the one with your transaction is a measure of confidence. Unless the attacker disrupts the entire process of transactions as long as your transaction is sufficiently low down in the chain it becomes extremely impracticable to be removed. Double spending is an issue that will always exist if you have randomness with the block creation method. That is why you should wait for a few blocks if you want stronger confidence in a transaction. It becomes extremely improbable that low down blocks in the chain will change.

Neverheless with a blochchain there is no 100% guarantee that a block does not change. The probability just converges to 1 that it won't. (I'm intentionally discarding checkpointing here as for this consensus is reached through a majority using the same software)

[r0ach]

What are you trying to say here? Coin weight in a Proof of Stake type model only deterministically gives you control if you own more than 50% of the coins.

I don't have time to reply to all this right now, but it's pretty common knowledge that you only need 51% of coins currently staking to control the network and not 51% of total coins.  Using coin age as a finite resource in this system just makes it easier to attack, which is why NXT never used it, and why Blackcoin is removing it.  Reputation makes a much better finite resource than coin age and makes it so large holders can't perform effortless attacks, just like how PoW works.

[raid_n]

What are you trying to say here? Coin weight in a Proof of Stake type model only deterministically gives you control if you own more than 50% of the coins.

I don't have time to reply to all this right now, but it's pretty common knowledge that you only need 51% of coins currently staking to control the network and not 51% of total coins.  Using coin age as a finite resource in this system just makes it easier to attack, which is why NXT never used it, and why Blackcoin is removing it.  Reputation makes a much better finite resource than coin age and makes it so large holders can't perform effortless attacks, just like how PoW works.

For simplicities sake it makes sense to assume most people have an interest to stake their coins or participate with their resources but yes, you are right that you only need > 50% of coins staked to deterministically form the longest chain.
It makes no real difference because whatever model you choose always reduces down to how likely it is for a single active entity to produce > 50% of the blocks.

There is very little real incentive to perform a > 50% attack because you'd shake confidence, no matter what method is used for block creation.
I think the issue is greatly exaggerated because then it is much easier to promote an altcoin with a new mining/minting scheme.

To me the real problem lies in ensuring privacy. And I do not mean through a new altcoin but rather implementing stronger privacy in bitcoin itself.




 

[r0ach]

There is very little real incentive to perform a > 50% attack because you'd shake confidence, no matter what method is used for block creation.

People keep using the phrase 51% attack to try and downplay the issue, like it's just some theoretical thing that won't happen because self motivated greed will prevent it, aka the rational miner factor.  Since when are rational miners considered even the top 10 security risks?  Did you also forget Bitcoin is advertised as having "no trusted third parties"?  Those pools that you can count with less than 5 fingers are your trusted third parties, which is why the system as is, has failed completely.

Giant pools are also way too large of an attack surface to be nationalized by governments, regulated to oblivion, demolished with TNT by order of environmental protection agency, etc.  There's a billion things that can and will go wrong with them.  Most likely Bitcoin will fail if it follows it's current path since it's not even close to what it's described as on the box.  If it doesn't fail, the best case scenario you will get out of the mining pool centralization is "governmentcoin".

Unless all current Bitcoin development is redirected towards getting rid of the mining pools, there's really no reason to support it.

There is some higher level thinking at work here though.  Most people are unable to put 1+1 together and figure out that if a global, anonymous currency was to become huge, it would most likely mean the end of central governments.  Even if you're some kind of super anarchist, is that something you really want to see during your lifetime?  The odds of being murdered by Obama zombies for a nickel is probably pretty high.  The same central governments probably have contingency plans to to prevent this from happening, either by never allowing the centralized pools to be removed from the protocol, or just waiting and nationalizing them.

[raid_n]

There is very little real incentive to perform a > 50% attack because you'd shake confidence, no matter what method is used for block creation.

People keep using the phrase 51% attack to try and downplay the issue, like it's just some theoretical thing that won't happen because self motivated greed will prevent it, aka the rational miner factor.  Since when are rational miners considered even the top 10 security risks?  Did you also forget Bitcoin is advertised as having "no trusted third parties"?  Those pools that you can count with less than 5 fingers are your trusted third parties, which is why the system as is, has failed completely.

[snip]

Unless all current Bitcoin development is redirected towards getting rid of the mining pools, there's really no reason to support it.

Here is what happens when you have a real attack:
1) The attacker can attempt a double spend
2) The attacker withholds a transaction to cause economic harm

Double spending is something that is quite time critical for the attacker. The further down a block is in the chain the more unlikely it becomes that the attacker can successfully replace the above chain with a new one.
Large double spends will be noticed and as an effect people will lose trust and move to something else. So realistically the attacker would try to pull off a one shot double spend for a very large amount of coins.
I do not know what policies are in place for big exchanges but you would expect them to wait quite a few blocks for very large sums.
The attacker would have to put in immense financial efforts to reach the >50% hash power and would probably gain little from the attack.
It only really makes sense if you are out to destroy bitcoin as a whole.

Equal argumentations can be made for Transaction withholding.

"Those pools that you can count with less than 5 fingers are your trusted third parties, which is why the system as is, has failed completely"

Those pools can't sign transactions for your coins. They can't double spend your transactions unless you WANT them to by broadcasting two different transactions for the same input.
If you send me coins I can require you to wait 1000 blocks before I send you goods or no blocks. This gives me the freedom to choose.
I can happily trust that in the current system it is very very very unlikely that a new chain with 1000 blocks will appear out of thin air to double spend that transaction.

[smooth]

1) The attacker can attempt a double spend
2) The attacker withholds a transaction to cause economic harm

Incomplete list, and you are ignoring some very important implications.

For example, withholding transactions isn't just a question of economic harm, it can also be used to whitelist/blacklist.

Better analysis here: http://hackingdistributed.com/2014/06/16/how-a-mining-monopoly-can-attack-bitcoin/

[r0ach]

Here is what happens when you have a real attack:
1) The attacker can attempt a double spend
2) The attacker withholds a transaction to cause economic harm

Please don't give me some primitive list off an FAQ.

I'm not talking about some one time double spend, I'm talking about how the pools are so large of an attack vector, that it's trivial for governments to take over or impose their will on the network.  Also how it's supposed to be a decentralized network without trusted 3rd parties, yet the tiny amount of mining pools are the trusted third parties.  The protocol never actually succeeded in it's stated goals, and is currently just a giant fugazi.

Do you remember the initial Bitcoin premise and intro to the world?  When Satoshi types he claims to have figured out a way to create decentralized consensus without trusted third parties?  Everyone gives him credit like he actually succeeded.  

He never did succeed.

[BuildTheFuture]

If governments cracked down on one or more pools, the pool participants would simply repoint their hardware to another pool or p2pool. Not a big deal.

[dropt]

If governments cracked down on one or more pools, the pool participants would simply repoint their hardware to another pool or p2pool. Not a big deal.

How would you know that they've been subverted by a government?  What about the event where large pools that control their own hashpower are subverted and there aren't any "pool participants" to speak of?

[smooth]

If governments cracked down on one or more pools, the pool participants would simply repoint their hardware to another pool or p2pool. Not a big deal.

How would they know? And aside from that, a lot of the hash rate is internal (big farms). Supposedly ghash moved some of their own hash rate off their pool to alleviate concerns over their market share. If external miners leave they just put it back (or expand).

The OP is right. There is really very little decentralized going on here. If decentralization is the goal, it is rotten to the core.

[BuildTheFuture]

If governments cracked down on one or more pools, the pool participants would simply repoint their hardware to another pool or p2pool. Not a big deal.

How would you know that they've been subverted by a government?  What about the event where large pools that control their own hashpower are subverted and there aren't any "pool participants" to speak of?

Either the pool is processing transactions/blocks normally or it isn't. As soon as the pool owner or participants notice something wonky, they can split and go somewhere else. Even the largest pool owners like ghash.io AFAIK only own roughly 25% of the pool hashrate themselves. At least that's the estimate I've seen of what chunk of ghash.io is CEX. And even that AFAIK is split up geographically in different jurisdictions and datacenters. Probably the largest chunk of hashpower you might be able to find in one pool+jurisdiction is under 10% of the total bitcoin hashrate.