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

[r0ach]

The reason behind this statement is two words, distributed consensus.

You see Bitcoin speakers, PhD lecturers, and even Bitcoin janitors like Gavin use phrases like this all the time, especially while trying to debunk security models of other systems like proof of stake.  The following is one such example from a Gmaxwell link by Andrew Poelstra, created only two months ago titled "Distributed Consensus from Proof of Stake is Impossible":

https://download.wpsoftware.net/bitcoin/pos.pdf

The problem with articles like this isn't the assumption that every theoretical form of proof of stake is broken, we'll just assume that statement is fact for now, the problem is that applying the same scrutiny to the current Bitcoin PoW security model gives you similar results.  You really have to go through some mental gymnastics to refer to a system controlled entirely by 1-4 pools as "distributed consensus".  

Earlier today, someone insisted to me that technically anything involving two parties counts as distributed.  In the case of Bitcoin, using textbook definitions like this obviously doesn't work, since both parties would be at best case 50% each, and attacks can occur with much less hash rate.  Defining at what point the Bitcoin network actually is distributed is a tricky thing.  For the context of computers, one very important phrase or requirement of distributed computing is the independent failure of components.  Some people might argue otherwise, but for my personal defintion, I'm going to argue that the system should still actually function with a single component failure in distributed computing.  

Back to the example above, most people would not consider two pools with 50% hashrate a valid consensus model for Bitcoin.  Let's assume, only for the sake of example, three pools with 33% each was acceptable.  Since we can't allow the network to fall to two pools, due to being an invalid security model, with three pools we are at the lowest state of functionality with no redundancy.  Even though the network technically functions in the example, we now have to add another pool, bringing the total to four, just to reach the lowest common definition of distributed computing by having a single increment of redundancy, or how I interpret the textbook definition, "independent failure of components".

Have we really even reached a textbook example of redundancy yet in the example?  The answer is an obvious no.  If all it takes is two out of four pools in the example to collude to bring us to an invalid security model, we obviously have no redundancy, or independent failure of components.  This also happens to be the current state of Bitcoin in the real world.  It's not even about Ghash bordering or exceeding 50% hash.  Even if they're vastly below that number, the possibility of the top two pools operating under coercion or collusion still means we have no redundancy, or real distributed computing.  

Even if you completely ignore the existence of Ghash, the number two and three pools operating together could even qualify as a system with no redundancy under many situations.  In other words, people really need to stop praising Bitcoin for it's security because it currently doesn't exist.

[Brewins]

Maybe its the reason why bitcoin is 600, not above 5k. The price is defined by how much people are willing to pay, and now its no much less than 600.


Even not being decentralized, it still is better than fiat in some sense, and not controlled by states or big corporations, so still better than fiat.
And from the end user side, taxes are small and money transfer is quicker, think most people just don't care or don't take time to think about all the decentralization stuff and risks.

[r0ach]

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.  

Someone asked earlier, well, how does this help if you don't have a solution.  I actually do, but it's nothing compatible with the standard BTC protocol and makes concessions in other areas.

If you want to control things like mining pool centralization it has to be done at the protocol level and can't just rely on the honor system, that's just not going to work.  Someone who disagrees with me thinks you can enforce p2pool on the protocol level by using latency as a greed incentivizer.  I prefer actual hard locks, but whatever.

[Qoheleth]

Hmm. People join up with pools primarily to reduce their variance; any old chip can theoretically find a block, but most people would rather have $1 for "sure" than a one-in-a-million chance to win a jackpot, even if the jackpot is paying a little better than the "sure" thing on the game-theoretical average. Faster blocks can reduce this pain point, but not eliminate it; unless you're fundamentally changing the proof of work mechanism, you'd need something like a thousand blocks a second to sufficiently level things out for a "citizen" miner. And faster blocks have staleness problems, too.

Someone asked earlier, well, how does this help if you don't have a solution.  I actually do, but it's nothing compatible with the standard BTC protocol and makes concessions in other areas.

New ideas that solve problems with Bitcoin are why anyone bothers with altcoin projects. Seems worth discussing, at least.

Someone who disagrees with me thinks you can enforce p2pool on the protocol level by using latency as a greed incentivizer.  I prefer actual hard locks, but whatever.

Also curious what you mean by this.

[r0ach]

Someone asked earlier, well, how does this help if you don't have a solution.  I actually do, but it's nothing compatible with the standard BTC protocol and makes concessions in other areas.

New ideas that solve problems with Bitcoin are why anyone bothers with altcoin projects. Seems worth discussing, at least.

Trying to work out whether more feasible to adapt to an existing chain or new one atm.

Someone who disagrees with me thinks you can enforce p2pool on the protocol level by using latency as a greed incentivizer.  I prefer actual hard locks, but whatever.

Also curious what you mean by this.

Ask Othe about that part, his idea.  He'll either be around a VTC or Bloatero dev channel.

[ElectricMucus]

Dear Apies, you can't solve social problems with technology.

[windjc]

Someone asked earlier, well, how does this help if you don't have a solution.  I actually do, but it's nothing compatible with the standard BTC protocol and makes concessions in other areas.

New ideas that solve problems with Bitcoin are why anyone bothers with altcoin projects. Seems worth discussing, at least.

Trying to work out whether feasible to launch while using an existing chain or new one atm.

Someone who disagrees with me thinks you can enforce p2pool on the protocol level by using latency as a greed incentivizer.  I prefer actual hard locks, but whatever.

Also curious what you mean by this.

Ask Othe about that part, his idea.  He'll either be around a VTC or Bloatero dev channel.

Honestly, your posts don't make much sense to me. I notice that your profile joined this forum right about the last bubble and you first interest was in CatCoin. Did you miss the BTC train or something?

You seem to be preoccupied with matters that don't matter. Do you think anyone in the Speculation forum cares which crypto will "win" 50 years from now when the dust settles? No. We care about which coin is winning now. Most of us will be so educated and ahead of the curve if another coin challenges Bitcion or if there is a major problem that develops with Bitcoin, that it won't matter. We will always be early adopters.

Your 51% attack issues don't matter for bitcoin now and they won't be the deciding factors 50 years from now.

[r0ach]

Honestly, your posts don't make much sense to me. I notice that your profile joined this forum right about the last bubble and you first interest was in CatCoin. Did you miss the BTC train or something?

You seem to be preoccupied with matters that don't matter. Do you think anyone in the Speculation forum cares which crypto will "win" 50 years from now when the dust settles? No. We care about which coin is winning now. Most of us will be so educated and ahead of the curve if another coin challenges Bitcion or if there is a major problem that develops with Bitcoin, that it won't matter. We will always be early adopters.

Your 51% attack issues don't matter for bitcoin now and they won't be the deciding factors 50 years from now.

Oh god, not this guy again.  I posted a single economic analysis of current BTC status in the thread below, you didn't like the result, and now you're on some kind of crusade against me for not saying BTC will be worth $10 billion each before 2015:

https://bitcointalk.org/index.php?topic=698038.msg7888383#msg7888383

As for trying to portray me as some kind of "Catcoin enthusiast", that was an era when there was only one new altcoin every week or so, and generally everyone would mine the hell out of them on launch day since everything was profitable and post in their threads.

Does this comment look like I really care about Catcoin?

Nobody said mining cats was going to be easy.

Does mining cats sound easy?

What about my post in the "Hamstercoin" thread.  Does this make me a "Hamstercoin enthusiast" ?

Mutant hoghamster is by far the best coin wallet picture:

^ If that's not the golden age of scamcoins, I don't know what is

[kireinaha]

[windjc]

Honestly, your posts don't make much sense to me. I notice that your profile joined this forum right about the last bubble and you first interest was in CatCoin. Did you miss the BTC train or something?

You seem to be preoccupied with matters that don't matter. Do you think anyone in the Speculation forum cares which crypto will "win" 50 years from now when the dust settles? No. We care about which coin is winning now. Most of us will be so educated and ahead of the curve if another coin challenges Bitcion or if there is a major problem that develops with Bitcoin, that it won't matter. We will always be early adopters.

Your 51% attack issues don't matter for bitcoin now and they won't be the deciding factors 50 years from now.

Oh god, not this guy again.  I posted a single economic analysis of current BTC status in the thread below, you didn't like the result, and now you're on some kind of crusade against me for not saying BTC will be worth $10 billion each before 2015:

https://bitcointalk.org/index.php?topic=698038.msg7888383#msg7888383

As for trying to portray me as some kind of "Catcoin enthusiast", that was an era when there was only one new altcoin every week or so, and generally everyone would mine the hell out of them on launch day since everything was profitable and post in their threads.

Does this comment look like I really care about Catcoin?

Nobody said mining cats was going to be easy.

Does mining cats sound easy?

What about my post in the "Hamstercoin" thread.  Does this make me a "Hamstercoin enthusiast" ?

Mutant hoghamster is by far the best coin wallet picture:

^ If that's not the golden age of scamcoins, I don't know what is

Its not about whether or not bitcoin is going to be worth $10 billion each, smh.

Its about the fact that your posts dont make a lot of sense and they seem to be better placed in the Bitcoin Discussion Thread, not the Price Speculation thread.

Since we are in the Price Speculation Thread, why don't you tell us what you think the intermediate price outlook is? Personally, I think the ATHs will fall in the next 12 months. I think institutional money will be the main catalyst - institutional money has a long history of pumps and a long history of chasing price. It may take a little more time for that train to get down the track, but once it gets rolling, I think $5kish a coin is a reasonable topping estimate. After institutional money has its say, I think fundamentals such as halving and user adoption will determine how high the price gets beyond that.

I also think the more big money gets involved, the more pressure will be applied to miners to developers to safe guard in apparent, albiet small, chance of attacks, including the over hyped 51%.

Meanwhile, other 2.0 currencies will continue to have a chance to make a case for a better crypto. This is going to take years to be settled though.

I do not think $600 has anything to do with the 51% attack. $600 has to do with lack of regulatory framework foremost.

[raid_n]

I might comment this later on because I've been at a party so bear with me:

Andrew Poelstra has no idea how distributed consensus works, not the slightest (I am assuming the language barrier is not so large as to twist can into can't etc...)

"It can be mathematically proven that given only a synchronous network it is impossible to achieve distributed consensus in a cryptographically guaranteed way"

Really? you are trying to quote FLP85 for synchronous systems?

FLP85 states that in an asynchronous system it becomes impossible to discern a failed process from one that is merely very slow.
This is a logical conclusion anyone can reasonably follow without requiring the formal proof. (If you can take as much time to answer to me as you want  I can't by any measure say you have not definitely sent me an answer without waiting indefinitely as for any time I wait you could take that time + 1 to answer me and that is still a valid amount of time I have to wait)

I've not rigorously looked through that paper but from flying over it I can tell the author has no idea what he is talking about.

[Carra23]

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.

[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.

This is something I've been wondering about recently.  With all the new mining hardware that's been purchased in the last few months, and the fact that the price hasn't moved much, I can see how there may be a lot of pressure to sell to pay off the equipment.  If it really looked like the price were going to take off again, more miners might hold on to their coins.  But as it doesn't look like we're about to hit ATHs anytime soon, they may be trying to get what they can, afraid that the price may drop more.

[r0ach]

The new coins coming in everyday is clearly a major factor which prevents price rise and is costly for existing holders.

You would do better trying to predict price by calculating cost of production, then valuating a percentage premium on top of that which takes into account network security and other benefits or services it brings.  I already went over the network security part, the rest, or "killer app" of Bitcoin, seems to either be black market, or an avoiding financial armageddon motive, zombie apocalypse currency in other words.  Bitcoin doesn't currently lend itself well to such a task with large, centralized mining pools requiring nuclear reactors.  Bitcoin really needs more of a mission statement for people to try and attempt to mold the protocol to meet that task, otherwise, you're selling swiss army knives, and nobody really buys those.

That mission statement, in my opinion, should be something along the lines of a digital asset that provides utility by being able to survive the quadrillion dollar derivatives bubble, but like I already said in this post and the one below, Bitcoin currently does not perform well as a zombie apocalypse currency.  Going long on Bitcoin is also the equivalent of going long on treasury bonds and fiat not collapsing since BTC is useless without infrastructure.

https://bitcointalk.org/index.php?topic=698038.msg7889487#msg7889487

This is why I believe proof of work mining is completely useless, but extremely necessary for distribution, and in order to fulfill some of Bitcoin's market niches as described above, it will have to make concessions and introduce something such as stake + reputation system to fix stake's inherent problems.  This will either be done by Bitcoin crashing tremendously and then big changes can be made, or by an altcoin overtaking it.  Someone will say, "can't do that, all reputation systems lead to centralization".  If you read the original post, you would see Bitcoin is already centralized with no distributed computing redundancy.  It would actually be extremely hard if not impossible to make it more centralized doing what I'm talking about.

[falllling]

bitcoin is over price, $4xx and $3xx are coming

[r0ach]

bitcoin is over price, $4xx and $3xx are coming

I noticed the broken, east Asian English.  Wolong?  Is that you?

[98problems]

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.

This is something I've been wondering about recently.  With all the new mining hardware that's been purchased in the last few months, and the fact that the price hasn't moved much, I can see how there may be a lot of pressure to sell to pay off the equipment.  If it really looked like the price were going to take off again, more miners might hold on to their coins.  But as it doesn't look like we're about to hit ATHs anytime soon, they may be trying to get what they can, afraid that the price may drop more.

If the miners did not earn enough bitcoin to recoup their initial investment them the miners would have nothing to sell.

[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.

This is something I've been wondering about recently.  With all the new mining hardware that's been purchased in the last few months, and the fact that the price hasn't moved much, I can see how there may be a lot of pressure to sell to pay off the equipment.  If it really looked like the price were going to take off again, more miners might hold on to their coins.  But as it doesn't look like we're about to hit ATHs anytime soon, they may be trying to get what they can, afraid that the price may drop more.

If the miners did not earn enough bitcoin to recoup their initial investment them the miners would have nothing to sell.

I'm confused.  Could you please explain what you mean?  Here's an example of what I'm saying: Let's say I buy $5,500 worth of mining equipment using fiat, and let's say that based on current and projected difficulty, I expect to be able to mine about 10 bitcoins before the difficulty becomes so high that I won't be able to mine profitably anymore.  As long as I can sell my mined coins for at least $550 each, I will break even (of course you'd have to consider electricity costs, too).  If the price starts rising, then I can be patient and see what happens since I know I'm still in profitable territory.  If price stays where it is or looks like it may start falling, then I may feel pressured to sell what I've mined so far so that I minimize my chances of taking a loss on my miner.

Of course, there might also be a point at which I would just hold my coins and hope for better prices.

[Oldminer]

Bitcoin is nothing more than a 'prototype' for something much bigger, much more advanced, and much more secure.

[oda.krell]

I agree with the analysis, r0ach. Mostly. changed my mind. OP has a valid point, wrapped up in a hysterical and sensationalist presentation.

De-decentralization is, in my view, the biggest (technical) challenge BTC faces at its current stage. Needless to say, just ignore the peanut gallery calling you a troll - shooting the messenger is always easier than accepting an unpleasant message.

That said, you seem to see the situation rather binary: either the network is decentralized, or it is not. I believe however that, taking into account human elements, i.e. not just looking at centralization/decentralization as a technical property of the network, we're very far from BTC being completely "centralized".

For one, the largest pools that could in principle collude in an attack have shown absolutely no sign of interest in doing so. In fact, them doing so would almost certainly be economically damaging to them. And other than a hypothetical attack, they don't hold special "voting powers" that grant them a disproportionate influence on decisions.

Second, the large pools are comprised to a large degree of individual miners, so the situation is different from, say, 2 or 3 large individual operators holding the same computing power as the currently largest pools.

Third, you mentioned it yourself, technical solutions (or proposals) exist, p2pool one of them. Right now, the incentive isn't there yet to fully switch to an alternative mining model, but I just don't see it as an urgent failure case either: if any form of abuse of a majority of computing power becomes known, the network's value will be damaged, I'm sure, but at the same time, the incentive to enforce decentralized mining will also be there finally. In the absence of such abuse, there is no urgent reason to switch (which is probably why we're not doing it). I'd prefer miners (and users, and investors) would think a bit more long term and provide more incentives to make the transition to a decentralized mining model (brought that up in a thread of my own), but until we're actually getting there, I fail to see how the current state is so bad that it prevents actual usage of the network for a pretty big portion of, say, online payment processing. It's not as if the alternatives are more secure, or less centralized. In fact, they're substantially worse on both counts - even if BTC security and centralization is not at its optimum.