Visa’s top-secret Operations Center / Bitcoin is so much cooler & cheaper :)

[ptshamrock]

http://www.usatoday.com/tech/news/story/2012-03-25/visa-data-center/53774904/1

SOMEWHERE ON THE EASTERN SEABOARD – Prisons are easier to enter than Visa's top-secret Operations Center East, its biggest, newest and most advanced U.S. data center.

The 8-acre facility looks like any other industrial park in a sleepy suburb. But the serene setting masks hundreds of cameras and a crack team of former military personnel. Hydraulic bollards beneath the road leading to the OCE can be quickly raised to stop an intruding car going 50 mph. Any speed faster, and the car can't navigate a hairpin turn, sending it into a drainage pond that functions as a modern-day moat.

The data center resembles a fortress, with dogged attention to detail. It can withstand earthquakes and hurricane-force winds of up to 170 mph. A 1.5-million-gallon storage tank cools the system. Diesel generators onsite have enough power, in the event of an outage, to keep the center running for nine days. They generate enough electricity for 25,000 households.

Once you get clearance from a guard station, get an OK from a roving security guy in a golf cart, and surrender a photo and fingerprint inside, the adventure begins.

There are plenty of reasons for the airtight security. Billions, in fact.

In an era when mobile purchases on smartphones and tablets are expected to grow 73% to $11.6 billion in the U.S. this year, security is a necessary obsession at OCE — and an acknowledgment of the perils posed by profit-minded hackers.

Mobile payments are just a trickle of the more than 200 million daily transactions processed here and at one other Visa data center in North America.

"We're at the forefront of data centers," says Rick Knight, head of global systems operations and engineering. "Now everyone has to do it."

The fortress is home to the facility's 130 workers, who are entrusted with the arduous task of keeping hackers out and the network up.

OCE is a "Tier 4" center, a certification from data center research organization Uptime Institute that requires that every mainframe, air conditioner and battery have a backup.

To meet such lofty standards, Visa has poured hundreds of millions of dollars annually into developing state-of-the-art risk-management technology. VisaNet's services include transaction risk scoring, data encryption and transaction alerts. It all adds up to highly accurate models to identify and address potential fraudulent deals before they're concluded. That has contributed in great part to global fraud rates of just 6 cents per $100 spent, according to Visa.

Visa's core-transaction network is private, immune — the company says — from Internet dangers such as denial-of-service attacks by the likes of Anonymous. When hackers took down Visa's corporate website in 2010, for example, it had no impact on the core network.

Data about data centers

More than half of the world's 13,000 large data centers are in the U.S., according to market researcher Gartner. It estimates $22 billion will be spent on new centers worldwide this year, after growth sputtered during the recession.

Data centers are increasingly in vogue as demand for digital data explodes with the popularity of cloud computing, tablets and smartphones. Google, Facebook and Apple are among the large tech companies that built their data centers in rural areas to save on land and power.

"Physical security is the foundation where you start," says John Thielens, chief security officer of Axway, a business-software vendor. "If you can afford it, build a data center. The big guys build their own."

At the same time, Hewlett-Packard, IBM and others have plunged into the business of managing data centers for corporate clients, says Philip Russom, a research director for The Data Warehousing Institute. Amazon.com says it offers cloud-based "data centers for rent."

"The growth in data center construction is very much tied to the growth in the amount of data which needs to be stored and delivered to businesses and consumers," says Rakesh Shah, director of product marketing and strategy at data-security firm Arbor Networks.

Visa is loath to say how much it spent to build its data center, but a conservative estimate is probably hundreds of millions of dollars, based on construction costs and equipment housed at the facility.

Once inside, visitors encounter a "mantrap" portal, which requires a badge and biometric image of the right index finger to gain access to the data center. The digital image is necessary to pass through a phalanx of shatter-resistant glass doors.

A NASA-like command center, with a 40x20-foot wall of screens and 42 firewalls, monitors the company's worldwide network, which Visa says processes 2,500 transactions per second.

Inside the fortress

The data center's main corridor is about three football fields long, connecting seven 20,000-square-foot rooms called pods.

Two pods contain Visa's core network, a third its corporate networks, and the fourth, development work. A fifth pod handles Visa's new mobile platforms, such as the recently acquired Fundamo, a mobile financial services platform. Two dormant pods await expansion.

Pods 4 and 5 are the brains of the network, a blur of hard drives spinning and fans whirring amid rows of IBM mainframes, Cisco Systems switches and EMC and Hitachi storage arrays. They're all connected by 3,000 miles of cable — enough to traverse the country.

"Yeah, this place is pretty impressive, but there's a lot at stake (in terms of security)," Knight says. "We need to keep things safe."

[1715475022]

1715475022

[BubbleBoy]

Bitcoin is so much cooler & cheaper

Are you sure about that ? In order for Bitcoin to scale to Visa volumes (5 trillion $/year), and assuming the average bitcoin is spent once per month (for M1 US dollars this period is about 45 days), the total capitalization of Bitcoin should rise to 400 bln dollars, or an exchange rate of about 40000 $/BTC.

This sharp price rise would enable about 75 billion dollars of mining fees for the remainder of 2012, and 50 billion dollars mining fees in 2013 and onwards, after the block reward drops to 25BTC/block. That's almost 300 bln $ in mining fees for the next 5 years. No less than about 200 bln$ if we account for the expansion of BTC monetary base, and keep the payment volume constant. On a competitive mining market, the bulk of this 200 bln dollars would go towards mining rigs and electricity, while the remainder will represent mining profits.

Visa's data center, impressive as it may seem, is still 1000x cheaper than the corresponding Bitcoin infrastructure.

[ptshamrock]

Ur right probably..

what title do u sugest?

My main problem with this datacenter is the centralisation..

and if btc ever gets this market share there will be mini asics everywhere ...

[cbeast]

VISA is fine for what it is now. The Bitcoin network isn't finished yet. It will scale way beyond anything VISA can dream of and will force VISA to adapt Bitcoin to stay in business.

and if btc ever gets this market share there will be mini asics everywhere ...

This is one step.

[BubbleBoy]

My main problem with this datacenter is the centralisation..

Sure, the infrastructure will be decentralized, maybe in 1000 "small" data centers, each the size of Visa's
As for ASICS, you can bet they will be the only form of mining, however that does not change the amount of resources Bitcoin farming will command since they will be available to all players and the difficulty will rise dramatically to compensate.

We could assume some minority players will have top technology with say 2x performance per watt most miners have, thus they will be able to pocket higher profits that could go for charity or for building nice mansions for their rich financiers. Still, the bulk of those 200bln$ worth of resources will be destroyed in the mad game of "proof of work".

[guruvan]

Bitcoin is so much cooler & cheaper

Are you sure about that ? In order for Bitcoin to scale to Visa volumes (5 trillion $/year), and assuming the average bitcoin is spent once per month (for M1 US dollars this period is about 45 days), the total capitalization of Bitcoin should rise to 400 bln dollars, or an exchange rate of about 40.000 $/BTC.

This sharp price rise would enable about 75 billion dollars of mining fees for the remainder of 2012, and 50 billion dollars mining fees in 2013 and onwards, after the block reward drops to 25BTC/block. That's almost 300 bln $ in mining fees for the next 5 years. No less than about 200 bln$ if we account for the expansion of BTC monetary base, and keep the payment volume constant. On a competitive mining market, the bulk of this 200 bln dollars would go towards mining rigs and electricity, while the remainder will represent mining profits.

Visa's data center, impressive as it may seem, is still 1000x cheaper than the corresponding Bitcoin infrastructure.

8M BTC * USD$40 < $USD400Billion.

to reach that level 1BTC would be $48,780.49 around now, or $19,047.62 once all BTC are made

At that level, security at the mine will be intense.

[cbeast]

Forget VISA. I expect Bitcoin to take on the $900 Trillion derivatives market and blow it up a few orders of magnitude.

[DavinciJ15]

Bitcoin is so much cooler & cheaper

Are you sure about that ? In order for Bitcoin to scale to Visa volumes (5 trillion $/year), and assuming the average bitcoin is spent once per month (for M1 US dollars this period is about 45 days), the total capitalization of Bitcoin should rise to 400 bln dollars, or an exchange rate of about 40.000 $/BTC.

This sharp price rise would enable about 75 billion dollars of mining fees for the remainder of 2012, and 50 billion dollars mining fees in 2013 and onwards, after the block reward drops to 25BTC/block. That's almost 300 bln $ in mining fees for the next 5 years. No less than about 200 bln$ if we account for the expansion of BTC monetary base, and keep the payment volume constant. On a competitive mining market, the bulk of this 200 bln dollars would go towards mining rigs and electricity, while the remainder will represent mining profits.

Visa's data center, impressive as it may seem, is still 1000x cheaper than the corresponding Bitcoin infrastructure.

Your math MAY be a bit off in many of your statements, first $40.00/btc would have a value of 400 million not billion then you statement that data center is 1000x cheaper than bitcoin infrastructure is also may not be accurate.  Currently there is 11.37 Terahashs, each gig hash represents $1500 in equipment investment on average, thus 11,370 x 1500 = $17,055,000 even if we doubled it that would just be the cost of the empty building not mentioning the all the taxes kick backs, environmentalist bullshit, delays, and paper work.

Just my 2 bit cents.

[DeathAndTaxes]

Yeah the math is off because it is based on VISA scale volume and 8x increase in BTC price.

While BTC may someday be that large it likely will be when subisidies are much lower.  fees will rise but not as much as subsidies are declining.  While the nominal value of BTC in fiat may rise in BTC terms future block likely will be worth much less than 50 BTC.  We will see the first step of that in 2013.  Block subsidy will decline to 25 and while miners may push for higher fees it is unlikely going to be even 10% of the subsidy drop.

So the network is likely to be cheaper and more efficient in the future (on a per tx basis) if/when BTC hits even Paypal level volumes much less VISA.  Also the "math" fails to account this is just an article on VISA newest datacenter.  They have lots of datacenters all over the world increasing their infrastructure cost by a magnitude.

TL/DR version:
If BTC cost is 1000x higher than VISA cost then BTC is dead now, so uninstall the client.  VISA gross profit margin is 28%.  Thus the price to users is ~4x their cost.  If BTC cost is 1000x higher then BTC ultimate price to users would be 250x what VISA price is.  Of course I don't think BTC will ever cost more than a tiny fraction of VISA but it shows how silly the 1000x number is.

[ptshamrock]

Forget VISA. I expect Bitcoin to take on the $900 Trillion derivatives market and blow it up a few orders of magnitude.

FUCK YEAH !

[MatthewLM]

Maybe I'm wrong about this but shouldn't bitcoin mining become more efficient as it scales since more transactions can be put into each block? And the amount of mining power would rely upon the profitability of doing mining so that if the revenues for mining goes down, then that will make it less profitable and miners would leave the scene, reducing the amount of mining power? With more transactions there can be more transaction fees per block.

[triplehelix]

TL/DR version:
If BTC cost is 1000x higher than VISA cost then BTC is dead now, so uninstall the client.  VISA gross profit margin is 28%.  Thus the cost to users is ~4x their cost.  If BTC cost is 1000x higher then BTC ultimate cost to users would be 250x what VISA cost is.  Kinda hard to attract users to that.   The reality is BTC cost is a tiny fraction of VISA once the network is "fully grown".

i think mining will become cost ineffective for the average joe long before that.  i imagine if bitcoin were to grow to these levels, corporate mining will come into play, and most likely exchanges and particularly bitcoin payment processor companies will have a large portion of the mining infrastructure for additional profit, fast proliferation of transactions, and security.

[DeathAndTaxes]

TL/DR version:
If BTC cost is 1000x higher than VISA cost then BTC is dead now, so uninstall the client.  VISA gross profit margin is 28%.  Thus the cost to users is ~4x their cost.  If BTC cost is 1000x higher then BTC ultimate cost to users would be 250x what VISA cost is.  Kinda hard to attract users to that.   The reality is BTC cost is a tiny fraction of VISA once the network is "fully grown".

i think mining will become cost ineffective for the average joe long before that.  i imagine if bitcoin were to grow to these levels, corporate mining will come into play, and most likely exchanges and particularly bitcoin payment processor companies will have a large portion of the mining infrastructure for additional profit, fast proliferation of transactions, and security.

I agree but I mean for USERS.

If the math was right and BTC cost was 1000x VISA cost and visa has a 4x markup then BTC price to end users (non-miners) would be 250x as high as VISA even if miners worked for cost.  That is obviously untrue.

[Phinnaeus Gage]

Source: Fake Wikileaks

Thanks, in (main) part, to the fees we collect from our growing customer base, VISA

...has poured hundreds of millions of dollars annually into developing state-of-the-art risk-management technology.

Cost of a Bitcoin building in 2010: $0
Cost of a Bitcoin Building in 2012: $0
Cost of a Bitcoin Building in 2030: $0
If Bitcoin ends the FED: Priceless!

[BubbleBoy]

The math is fine: if 10 million coins are in existence, in order to reach annual Visa volumes a coin needs to be worth 40000$. Proportionately less after more coins are minted, proportionately more if the payment volume rises. The mining revenue would rise to 1 million USD/block in 2013 - 2016, and the miners will use those earnings for rigs, electricity and profits.

The 1000x apparent inefficiency as compared to Visa has nothing to do with the actual efficiency of the Bitcoin payment network, rather to the particular way coin minting is performed. If Bitcoin achieves Visa levels after the initial coin distribution phase is completed (a few decades from now), the mining revenues will be much more modest. The 1000x factor is true today, and will halve every four years.

If the math was right and BTC cost was 1000x VISA cost and visa has a 4x markup then BTC price to end users (non-miners) would be 250x as high as VISA even if miners worked for cost.  That is obviously untrue.

You are not accounting for the hidden revenue that seigniorage generates. Since Visa works with national currencies it does not have this revenue stream, so all it's markup is passed on the the consumers.

When an investor buys bitcoins for the first time, he enables miners to burn those resources in their mining rigs and mine a shiny new bitcoin for him. The resources are forever wasted but apparently he still "has the money" in new bitcoins - a curious case of having one's cake and eating it too. Conversely when Bitcoin will fail (as all human endeavors eventually do), someone will be left holding worthless bits. So from the point of view of the participants in Bitcoin, the markup  is deffered until the system is closed, whenever that may be - tomorrow or one thousand years from now.

<soapbox>
From the point of view of the society, we are better off avoiding a proof-of-work monetary system, like Bitcoin or gold. If we can convince our governments to issue sound, non-inflationary fiat money we can put those wasted resources to better use today. It's travesty of our times that the resources saved by fiat money, instead of making the society richer, are siphoned by the rent seeking bankster elite.
</soapbox>

[bitcoinbetas]

What is Visa?

[triplehelix]

What is Visa?

its what good looking russian women use to come to the US.

[DavinciJ15]

You are not accounting for the hidden revenue that seigniorage generates. Since Visa works with national currencies it does not have this revenue stream, so all it's markup is passed on the the consumers.

OK, I see your point now. However the seigniorage is the fraudulent part of Visa.  {In criminal law, a fraud is an intentional deception made for personal gain or to damage another individual;} The credit system does not inform the individuals that the credit is created with no cost to the bank, thus interest paid on balances owed makes you a free slave, also this diminishes the value of all other currency in existence.

Some may say... Whats wrong with this system?  

Well if you create wealth you added to society by creating something people wanted or needed and you can spend or save the effort in another product of the free market, historically such a product has been gold or silver.  If you loan the gold you are effectively transferring the work you provided and saved to a debtor, (unlike loaning out unlimited money) if the debtor did not pay you back no extra value was added to the economy.  If a bank is not paid back they must pay back the outstanding balance thus same as if we used gold, so you may ask where is the fraud?   However the fraud is the banks know that's not what happens.  The banks ether gets A BAIL OUT by getting your government to go into debt, (taxing you to pay their bad loans) or by going into debt them selves to cover the loses, or the debt is marked on their books as still good (aka "mark to model").

Thus I must agree with 1000x efficiency of VISA if you get money (AKA stored labor and production) for free.

However if you include the real cost of the free labor and production its not very efficient.

[cunicula]

My main problem with this datacenter is the centralisation..

Sure, the infrastructure will be decentralized, maybe in 1000 "small" data centers, each the size of Visa's
As for ASICS, you can bet they will be the only form of mining, however that does not change the amount of resources Bitcoin farming will command since they will be available to all players and the difficulty will rise dramatically to compensate.

We could assume some minority players will have top technology with say 2x performance per watt most miners have, thus they will be able to pocket higher profits that could go for charity or for building nice mansions for their rich financiers. Still, the bulk of those 200bln$ worth of resources will be destroyed in the mad game of "proof of work".

There is no way that bitcoin could survive that long without incorporating proof-of-stake to replace proof-of-work. The scenario where bitcoin grows to become some vast resource consuming monster is not plausible. The solution is on the table, if bitcoin seems workable in the long-run, someone will come along and implement it.

[DavinciJ15]

<soapbox>
From the point of view of the society, we are better off avoiding a proof-of-work monetary system, like Bitcoin or gold. If we can convince our governments to issue sound, non-inflationary fiat money we can put those wasted resources to better use today. It's travesty of our times that the resources saved by fiat money, instead of making the society richer, are siphoned by the rent seeking bankster elite.
</soapbox>

BubbleBoy is a good person.  How do I know?  Only a good person would believe the government will do the right thing with direct access to a monetary printing press.  I'm sure you would do the right thing but historically we never really gotten good people in government.

[Paul Troon]

BubbleBoy is a good person.  How do I know?  Only a good person would believe the government will do the right thing with direct access to a monetary printing press.  I'm sure you would do the right thing but historically we never really gotten good people in government.

For more on what DavinciJ15 is talking about, check out this excellent book by Detlev Schlichter.  Mr. Schlichter does a good job of debunking much of what you read in the financial press about fiat currency and an ever increasing money supply being a good thing.

[cbeast]

BubbleBoy is a good person.  How do I know?  Only a good person would believe the government will do the right thing with direct access to a monetary printing press.  I'm sure you would do the right thing but historically we never really gotten good people in government.

For more on what DavinciJ15 is talking about, check out the excellent book: Detlev Schlichter's book.  Mr. Schlichter does a good job of debunking much of what you read in the financial press about fiat currency and an every increasing money supply being a good thing.

From that link:

Mankind has used money for more than 2,500 years. For most of history, money was a commodity of limited and practically inelastic supply.

I've been looking for a post to interject this story. It seems that man has been carrying tokens of value a little longer than that.

http://www.sciencedaily.com/releases/2012/03/120323134409.htm

The chimpanzees regarded the coula nuts as a more highly-prized resource and competed for them more intensely.

In such high-competition settings, the frequency of cases in which the chimpanzees started moving on two legs increased by a factor of four. Not only was it obvious that bipedal movement allowed them to carry more of this precious resource, but also that they were actively trying to move as much as they could in one go by using everything available -- even their mouths.

[DavinciJ15]

BubbleBoy is a good person.  How do I know?  Only a good person would believe the government will do the right thing with direct access to a monetary printing press.  I'm sure you would do the right thing but historically we never really gotten good people in government.

For more on what DavinciJ15 is talking about, check out the excellent book: Detlev Schlichter's book.  Mr. Schlichter does a good job of debunking much of what you read in the financial press about fiat currency and an every increasing money supply being a good thing.

Thanks for the book.  I only educated myself in this stuff in 2007 after Ron Paul said... "This monetary system is unfair it transfers wealth from the poor and the middle class to the rich."  during a debate and when no one corrected him not even the TV News, my JAW DROPPED. I thought he was liar and just another scum bag politician wanting to screw us over after we voted for him, when I researched him my jaw dropped again.

At that point I realized I knew nothing about the monetary system and I started to learn.  When I read that the money was created out of debt I could not believe it who would be dumb enough to allow this system to exist.

Anyhow after my Neo "I don't believe it" moment I dumped all my retirement accounts and was in 100% gold and silver and tried to solve our currency problem via software on my own, but could not come up with anything.

So when I saw Bitcoin it was exactly what I would have invented if I knew about Proof of Work.

[cunicula]

While BTC may someday be that large it likely will be when subisidies are much lower.  fees will rise but not as much as subsidies are declining.  

You have no idea what fees will be, nor is there any way of knowing. It is not a moot point because bitcoin could avoid this issue entirely if it incorporated better design principles.

Fees in excess of those charged by VISA are necessary to maintain bitcoin's current security level.  Of course, fees like this will kill bitcoin. Maintenance of the current security level is not attainable or desirable using the present technology.

The other option is to relax security to economize on verification costs. It is not clear how lax security can get before security problems themselves kill bitcoin.

Bitcoin's survival depends on finding a "sweet spot" where a sufficient level of security is available at txn verification costs considerably lower than VISA's. I highly doubt there is a sweet spot using the current technology.

The technology will have to be reworked to make building a secure blockchain less costly. In particular, there is absolutely no need for hardware to be purchased or electricity to be consumed in significant amounts in order to verify txns. Severe inefficiencies associated with proof-of-work would be obvious to any micro-economic theorist. I'm not claiming to be a special guy. Anyone in my discipline (excluding nutjobs such as Austrian economists), would give the same answers. The fact that we ended up with proof-of-work is due to Satoshi's failure to seek advice from experts outside of computer science and cryptography. It is purely a mistake and should be fixed.

[DeathAndTaxes]

You have no idea what fees will be, nor is there any way of knowing.

Fees in excess of those charged by VISA are necessary to maintain the bitcoin's current security level.

I support the idea of proof of stake but your insistence that proof of stake solves everything in every thread about every future risk of Bitcoin is .... tiring.  You do a good job of driving away supporters.

[cunicula]

You have no idea what fees will be, nor is there any way of knowing.

Fees in excess of those charged by VISA are necessary to maintain the bitcoin's current security level.

I support the idea of proof of stake but your insistence that proof of stake solves everything in every thread about every future risk of Bitcoin is .... tiring.  You do a good job of driving away supporters.

It does solve pretty much everything... It is tiring for me to listen to people fumble around with other solutions as if they were promising in any way.

[DeathAndTaxes]

Then solve all Bitcoins problems already.

[cunicula]

Then solve all Bitcoins problems already.

It is up to someone with programming/cryptography skills to implement my solution. I am willing to work with them to improve upon it if desired. I feel that I have done a lot just by putting answers out there for anyone to use. I cannot reasonably do any more than this.

[Daily Anarchist]

BubbleBoy is a good person.  How do I know?  Only a good person would believe the government will do the right thing with direct access to a monetary printing press.  I'm sure you would do the right thing but historically we never really gotten good people in government.

For more on what DavinciJ15 is talking about, check out the excellent book: Detlev Schlichter's book.  Mr. Schlichter does a good job of debunking much of what you read in the financial press about fiat currency and an every increasing money supply being a good thing.

Thanks for the book.  I only educated myself in this stuff in 2007 after Ron Paul said... "This monetary system is unfair it transfers wealth from the poor and the middle class to the rich."  during a debate and when no one corrected him not even the TV News, my JAW DROPPED. I thought he was liar and just another scum bag politician wanting to screw us over after we voted for him, when I researched him my jaw dropped again.

At that point I realized I knew nothing about the monetary system and I started to learn.  When I read that the money was created out of debt I could not believe it who would be dumb enough to allow this system to exist.

Anyhow after my Neo "I don't believe it" moment I dumped all my retirement accounts and was in 100% gold and silver and tried to solve our currency problem via software on my own, but could not come up with anything.

So when I saw Bitcoin it was exactly what I would have invented if I knew about Proof of Work.

Cool story. Have you discovered anarcho-capitalism yet? Come visit my website if you're interested.

[guruvan]

Then solve all Bitcoins problems already.

It is up to someone with programming/cryptography skills to implement my solution. I am willing to work with them to improve upon it if desired. I feel that I have done a lot just by putting answers out there for anyone to use. I cannot reasonably do any more than this.

LOL. You have all the solutions, but none of the skills? You know everything but can't do anything? All this about the one true solution, but there's no code? Those who can't do around here, buy. If it's such a great solution, show us the code.

Arrogance is probably the worst enemy of security.

[cunicula]

Then solve all Bitcoins problems already.

It is up to someone with programming/cryptography skills to implement my solution. I am willing to work with them to improve upon it if desired. I feel that I have done a lot just by putting answers out there for anyone to use. I cannot reasonably do any more than this.

LOL. You have all the solutions, but none of the skills? You know everything but can't do anything? All this about the one true solution, but there's no code? Those who can't do around here, buy. If it's such a great solution, show us the code.

Arrogance is probably the worst enemy of security.

Ha, someone will implement my idea eventually. They will just call it their own idea when they do it. That's fine. In true Keynesian spirit, I welcome them.

https://bitcointalk.org/index.php?topic=49683.msg807106#msg807106

I don't think this implementation will come to anything worthwhile, but there is plenty of time for new and better copycats to come on board.

[niko]

...monitors the company's worldwide network, which Visa says processes 2,500 transactions per second.

Would someone versed in scalability issues please chime in?  Can Bitcoin network function at such rates - equivalent to 1.5 million transactions per block?

[markm]

...monitors the company's worldwide network, which Visa says processes 2,500 transactions per second.

Would someone versed in scalability issues please chime in?  Can Bitcoin network function at such rates - equivalent to 1.5 million transactions per block?

Hopefully only merged-mining operations will need to deal with such volumes. Client-oriented systems would be able to focus on just one blockchain (or just a few blockchains). A faster blockchain than bitcoin could take up much of the small-value transaction volume, leaving the original bitcoin blockchain for large high value transactions. Hopefully bitcoins will be worth about $40,000 or more each, and maybe not used much in day to day transactions, which would fall to one or more of the lower-value blockchains...

-MarkM-

[BubbleBoy]

Proof of stake is a solution for a different problem: byzantine fault tolerance of the coin database, a.k.a double spend protection and global consistency. For this task Bitcoin uses a uniquely creative solution, called by some "Nakamoto proof of work chains"; the necessary work is funded at equilibrium (block reward=0) by the transaction fees.

What we are talking about here is initial coin disbursement, coin minting. The issue is confusing because Bitcoin cleverly employs the same proof of work for both minting and byzantine fault tolerance, thus jump starting a secure network before the transaction fee volume would otherwise enable it. While you could certainly create an e-currency based on proof of stake, the issue of initial coin distribution remains open. Without initial distribution there is no stake, thus no proof of stake.

So a resource-friendly currency would have to imagine a different way for coin distribution. Incidentally, a theoretical result know as the Sybil attack proves there is no possible method by which you could do a "fair" distribution of coins over an anonymous medium such as the internet. You must either allow some degree of centralization, or fallback to proof of work. Anything else will be subverted by automated programs and allow their authors to earn most of the minted money.

Here's how a non-POW, centralized-but-fair distribution method could go: a central authority mints all possible coins allowed by the protocol, prints them onto little pieces of paper, then pulls a "Helicopter Ben". Alternatively, a central authority has no minting powers, but can approve (or veto) a list of charitable organizations that would receive the proceeds of seigniorage; when the monetary mass is scheduled to increase, the charities get the money, in a proportion democratically chosen by the holders of currency (similar to proof of stake).

BubbleBoy is a good person.  How do I know?  Only a good person would believe the government will do the right thing with direct access to a monetary printing press.  I'm sure you would do the right thing but historically we never really gotten good people in government.

I have more faith in democracy. I'm sure if the general public understood the problems, there would be instant political will for change. As always, the problem lays with the public, not the politicians:
http://www.maniacworld.com/the-public-sucks.html

[markm]

Actually, proof of stake can solve the initial distribution problem in a way, simply by initially issuing coins to the stakeholders.

Have proponents of proof of stake put up wealth, in return for which they are provided with, between them, the sum total number of coins ever to be minted. Like, say, have 210 stakeholders and issue to each of them at the start 10,000 coins.

Actually I guess they maybe don't even have to put up any wealth to get those initial coins unless there is enough competition to become an initial stakeholder that making them sacrifice some wealth to get to be one is necessary to avoid six billion people all wanting to be initial stakeholders.

-MarkM-

[BubbleBoy]

Well, 210 people meeting and declaring themselves the stakeholders of the new currency is exactly what centralization means, except maybe if those 210 people will be the only users of the currency for it's entire lifetime.

The problem is this: how to create a distributed and eco-friendly currency, usable by anybody, without creating a perverse incentive for the early adopters? The system should succeed on it's technical merits alone, not by fanatical backing from a vested minority.

[cunicula]

Proof of stake is a solution for a different problem: byzantine fault tolerance of the coin database, a.k.a double spend protection and global consistency. For this task Bitcoin uses a uniquely creative solution, called by some "Nakamoto proof of work chains"; the necessary work is funded at equilibrium (block reward=0) by the transaction fees.

What we are talking about here is initial coin disbursement, coin minting. The issue is confusing because Bitcoin cleverly employs the same proof of work for both minting and byzantine fault tolerance, thus jump starting a secure network before the transaction volume would otherwise enable it. While you could certainly create an e-currency based on proof of stake, the issue of initial coin distribution remains open. Without initial distribution there is no stake, thus no proof of stake.

The distribution problem here is extremely trivial. A currency could begin as pure proof-of-work and then progress to proof-of-stake over time.

Nevertheless, these are worthwhile points. Devising an optimal distribution process is quite complex. It requires a lot of data and modeling. Proof-of-work is almost certianly suboptimal, but it is widely accepted. It is probably more practical to just copy proof-of-work and give up on improvements in this area.

[BubbleBoy]

Quite the contrary, distribution is key. Ignoring distribution, the proof-of-work chains are an elegant solution to a hard CompSci problem, and relatively efficient when funded be fees only. The required security of the network is proportional to the largest payment it can process, not total volume. The Bitcoin mining hardware existing as of today is sufficient to guard against multi-million dollar fraud. Thus a Visa sized Bitcoin network can protect multi-million dollar transactions with abysmal fees.

On the other hand, if you go for a POW distribution, you can either:
- create a limited initial monetary base like in Bitcoin and expect massive deflation, perverse incentives for the early adopters, and periodic bubbles; as a person of "Keynesian spirit" which has a Krugman avatar, you should probably see the problem here
- create a macroeconomically sound monetary expansion for the lifetime of the system, case in which the resources wasted for POW become a significant size of the economy, i.e a "vast resource consuming monster"

[DeathAndTaxes]

...monitors the company's worldwide network, which Visa says processes 2,500 transactions per second.

Would someone versed in scalability issues please chime in?  Can Bitcoin network function at such rates - equivalent to 1.5 million transactions per block?

Yes however full nodes would require some significant hashing power.  Likely transaction processing (not just block hash generation) would need to be GPU (or FGPA) accelerated.  Full nodes would require significant memory to keep transaction pool fast and large arrays of fast disks.  If Bitcoin ever got that large most users wouldn't run full nodes and instead connected to the network via light clients.

[DavinciJ15]

Then solve all Bitcoins problems already.

It is up to someone with programming/cryptography skills to implement my solution. I am willing to work with them to improve upon it if desired. I feel that I have done a lot just by putting answers out there for anyone to use. I cannot reasonably do any more than this.

Some of my favorite Krugman-isms are...

Paul Krugman: Fake Alien Invasion Would End Economic Slump

Yeah Paul good idea but a better one would be if we just selectively evacuated and blew up cities, this way we can rebuild them without all the casualties.  Think about all the economic activity, people working to blow up the cities, TV shows, clean up crews and much more.  Talk about economic BOOM, no pun intended.

The baby-sitting co-op that went bust teaches us something that could save the world.

The title shows us why your plan will not work yet you still persist Paul, I'm impressed.  Why?  I don't know anyone who can write down a solution that ends in disaster and call a plan to save the world.  You are one of a kind Paul Krugman you deserve that fake Nobel prize.


I wonder if people would be dumb enough to believe in a Nobel prize in pooping if a banker created it, called it Nobel then paid the official committee to give it out along side of rest of the Nobel prizes.  I mean it worked for economics so why not Nobel poop?  The winner would the guy who is full of shit, just like the economic prize winner.  

[cunicula]

The incentives of a competitor to sabotage bitcoin are proportional to total market size, not the size of the largest individual txn. With that out of the way, let's return to substantive issues.

1) Proof-of-work distribution can be copied by a proof-of-stake system. Thus any perceived distributional advantages of proof-of-work could also be enjoyed by a proof-of-stake system. This is a non-issue.

2) Proof-of-work is secured through competitive consumption of external resources. External resource consumption requires a net input of resources. This must be supported through fees levied on the user base. The exact level of fees necessary is hard to say. I think a 5% tax on each send is a plausible prediction. This is not compatible with a competitive payment platform. VISA will not need to burn fossil fuels to process each payment, but bitcoin will. This will kill bitcoin.

Proof-of-stake is secured through competitive transfers of internal resources. These transfers are expensive from an individual's perspective and thus effective in securing the system. However, they are just transfers. Transfers do not require external input of resources and thus do not require the imposition of onerous fees. This is compatible with a competitive payment platform.

3) There is never any point at which a proof-of-work currency could be more secure than an otherwise identical proof-of-stake currency. If you assume rational behavior, as soon as the first block is mined proof-of-work currency will necessarily provide inferior security. If you like, I will post a mathematical argument supporting this.

Your argument that proof-of-work enables a jump to a high level of initial security is completely wrong. It is the block reward which does this. Proof-of-work has nothing to do with it. Proof-of-stake can also have block reward.
 

[Blinken]

Ooooooh, "Somewhere on the Eastern Seaboard"... right this place is so secret nobody knows where it is, right.

USA Today is bunch of asshats and idiots and so is their readership.

The VISA operations center east is located in Richmond, Virginia, at the intersection of Russell Branch Parkway and Loudon County Parkway. The gate can be reached also by taking Richfield Way off of Rt. 7. George Washington University is right on the other side of Route 7 from the VISA campus.

So much for super secrecy.

[DavinciJ15]

The incentives of a competitor to sabotage bitcoin are proportional to total market size, not the size of the largest individual txn. With that out of the way, let's return to substantive issues.

1) Proof-of-work distribution can be copied by a proof-of-stake system. Thus any perceived distributional advantages of proof-of-work could also be enjoyed by a proof-of-stake system. This is a non-issue.

2) Proof-of-work is secured through competitive consumption of external resources. External resource consumption requires a net input of resources. This must be supported through fees levied on the user base. The exact level of fees necessary is hard to say. I think a 5% tax on each send is a plausible prediction. This is not compatible with a competitive payment platform. VISA will not need to burn fossil fuels to process each payment, but bitcoin will. This will kill bitcoin.

Proof-of-stake is secured through competitive transfers of internal resources. These transfers are expensive from an individual's perspective and thus effective in securing the system. However, they are just transfers. Transfers do not require external input of resources and thus do not require the imposition of onerous fees. This is compatible with a competitive payment platform.

3) There is never any point at which a proof-of-work currency could be more secure than an otherwise identical proof-of-stake currency. If you assume rational behavior, as soon as the first block is mined proof-of-work currency will necessarily provide inferior security. If you like, I will post a mathematical argument supporting this argument.

Your argument that proof-of-work enables a jump to a high level of initial security is completely wrong. It is the block reward which does this. Proof-of-work has nothing to do with it.
 

I own a % of the Federal Reserve and the rest of the STAKE holders agree it should continue printing money and giving it to us.
Proof-of-stake works for for me and my crooked friends.
I don't like proof-of-work ether because it means if someone works harder they will beat me because they built a better mouse trap.

"Competition is a sin!" - John D. Rockefeller  <-- visionary!

FYI I am being sarcastic.

[BubbleBoy]

1) Proof-of-work distribution can be copied by a proof-of-stake system. Thus any perceived distributional advantages of proof-of-work could also be enjoyed by a proof-of-stake system. This is a non-issue.

Your commitment for proof of stake evangelism might be interfering with your ability to understand my position. What I'm saying is that neither Bitcoin nor POScoin solve the distribution problem - the major source of inefficiency for e-coins. Unless you solve the distribution issue without wasting resources, it doesn't really matter how byzantine consensus is achieved.

I am a fan of POS also, and in fact I've toyed with the idea even before I've seen it in one of the original proof of stake threads. It's probably the most straightforward way to implement a Bitcoin like system without Nakamoto POW chains (albeit with bandwidth scaling problems in a pure POS system). However when I'm talking about Bitcoin inefficiency I'm referring to the wasteful nature of minting coin by burning electricity in a non-reversible process. An altcoin based on POS will be equally wasteful if it also does minting by way of burning electricity.

The incentives of a competitor to sabotage bitcoin are proportional to total market size, not the size of the largest individual txn.
[...]
This must be supported through fees levied on the user base. The exact level of fees necessary is hard to say. I think a 5% tax on each send is a plausible prediction.

5% is implausibly high. Even allowing for competing payment processors attacking the network directly, they will likely won't be willing to spend more than the profit margin enabled by the new customers. How did you produce that number ?

[cunicula]

1) Proof-of-work distribution can be copied by a proof-of-stake system. Thus any perceived distributional advantages of proof-of-work could also be enjoyed by a proof-of-stake system. This is a non-issue.

Your commitment proof of stake evangelism might be interfering with your ability to understand my position. What I'm saying is that neither Bitcoin nor POScoin solve the distribution problem - the major source of inefficiency for e-coins. Unless you solve the distribution issue without wasting resources, it doesn't really matter how byzantine consensus is achieved.

I am a fan of POS also, and in fact I've toyed with the idea even before I've seen it in one of the original proof of stake threads. It's probably the most straightforward way to implement a Bitcoin like system without Nakamoto POW chains (albeit with bandwidth scaling problems in a pure POS system). However when I'm talking about Bitcoin inefficiency I'm referring to the wasteful nature of minting coin by burning electricity in a non-reversible process. An altcoin based on POS will be equally wasteful if it does minting via mining for a block reward.

Oh, okay. I agree with you then. I would prefer distribution by a centralized authority such as a government. The centralized authority would use distribution to provide incentives for merchant and consumer adoption. Essentially, you would try to monitor purchases that use bitcoin and then provide temporary "cash back" rewards to merchants that get consumers to make purchases with bitcoin. Merchants would then have an incentive to offer discounts for bitcoin purchases. Funding for the incentives comes from block reward.

I've given up on evangelizing this type of distribution because community resistance to any kind of pre-mine, centralized authority, or subsidization is even stronger than resistance to proof-of-stake.

[BubbleBoy]

Fat chance for the government to create such a system. The whole point of Bitcoin and friends is to circumvent government restrictions in a distributed fashion; if a friendly government exists, it is overkill to use such complex systems.

While some centralization is needed for ecologic minting, we don't need to go "full retard" and put the system into govt. hands. We simply need a trusted authority that can vouch a certain public key corresponds to a real life charity. The trusted authority will not have money creation privileges or any other control over the system. When the charity list is published and time has come to print some money, the charities receive the cash in a proportion democratically chosen by the holders of the currency; voting is done by proof of stake, a setting in your client that embeds your charity choice for all transactions you create.

The charity validation authority is needed since otherwise people will designate their own wallet as a charity and earn interest simply for holding money.

[DavinciJ15]

The incentives of a competitor to sabotage bitcoin are proportional to total market size, not the size of the largest individual txn. With that out of the way, let's return to substantive issues.

1) Proof-of-work distribution can be copied by a proof-of-stake system. Thus any perceived distributional advantages of proof-of-work could also be enjoyed by a proof-of-stake system. This is a non-issue.

2) Proof-of-work is secured through competitive consumption of external resources. External resource consumption requires a net input of resources. This must be supported through fees levied on the user base. The exact level of fees necessary is hard to say. I think a 5% tax on each send is a plausible prediction. This is not compatible with a competitive payment platform. VISA will not need to burn fossil fuels to process each payment, but bitcoin will. This will kill bitcoin.

Proof-of-stake is secured through competitive transfers of internal resources. These transfers are expensive from an individual's perspective and thus effective in securing the system. However, they are just transfers. Transfers do not require external input of resources and thus do not require the imposition of onerous fees. This is compatible with a competitive payment platform.

3) There is never any point at which a proof-of-work currency could be more secure than an otherwise identical proof-of-stake currency. If you assume rational behavior, as soon as the first block is mined proof-of-work currency will necessarily provide inferior security. If you like, I will post a mathematical argument supporting this.

Your argument that proof-of-work enables a jump to a high level of initial security is completely wrong. It is the block reward which does this. Proof-of-work has nothing to do with it. Proof-of-stake can also have block reward.
 

I could not figure out why Krugmanites like yourself can not see what is obviously destructive ends of you ideas until I saw this video again today and now I SEE!

"To change the perception of reality, of every American, to such an extent that despite the abundance of information, no one is able to come to sensible conclusions, in the interest of defending themselves their families, their community, and their country."
...
"A person who was demoralized is unable to assess true information. The facts tell nothing to him. Even if I shower him with information, with authentic proof, with documents, with pictures. Even if I take him by force to the Soviet Union and show him concentration camp he will refuse to believe it until he is going to receive a kick in his fat bottom. When the military boot crashes his, then he will understand, but not before that. That's the tragic of the situation of demoralization." - Yuri Bezmenov

The banksters did the same to you so well that you are unable to see the destruction of your ideas even when you write it out yourself.  I have bow down to the banksters greatness and learn what school did you go to?   Now that I know there is no showing you the truth with facts I would like to learn more about how you got your education.

I apologize for my jokes and sarcasm, since there is no point in presenting facts to you I want to learn more about how you come to your conclusions.  Maybe you do understand that proof-of-stake is profitable in the short run but destructive in the long run? Do you agree that in the long run we are all dead so who cares?  Or do you believe its sustainable? Do you not agree that all centralized systems become compromised?  I am now fascinated with your thought process.

Send me your address I will send 2 BTC for answering my questions.


Regards

Davinci

[cunicula]

You do understand that proof-of-stake is profitable in the short run but destructive in the long run?

Hmmm... No, I don't understand this at all. My views are pretty damn clear, just check my post history. Perhaps it would be better for you to explain. Please use a logical argument to support your view that proof-of-stake has negative properties which are not also present in proof-of-work.

[DavinciJ15]

You do understand that proof-of-stake is profitable in the short run but destructive in the long run?

Hmmm... No, I don't understand this at all. My views are pretty damn clear, just check my post history. Perhaps it would be better for you to explain. Please use a logical argument to support your view that proof-of-stake has negative properties which are not also present in proof-of-work.

Sorry, wrong question it's clear you don't understand the duplicity.  I just want to understand your line of thinking, thus may I ask if HYPOTHETICALLY you solution was destructive in the long run would you still support it?

[cunicula]

Sorry, wrong question it's clear you don't understand the duplicity.  I just want to understand your line of thinking, thus may I ask if HYPOTHETICALLY you solution was destructive in the long run would you still support it?

You are not interested in a substantive, logical discussion, so I am not responding to this.

[DavinciJ15]

Sorry, wrong question it's clear you don't understand the duplicity.  I just want to understand your line of thinking, thus may I ask if HYPOTHETICALLY you solution was destructive in the long run would you still support it?

You are not interested in a substantive, logical discussion, so I am not responding to this.

Enough said, you answered my question.

[RSantana]

In case anyone is curious here is where the data center is located:

http://maps.google.com/maps?q=Ashburn,+VA+visa&hl=en&ll=39.048702,-77.444515&spn=0.012465,0.026436&sll=38.739319,-77.002254&sspn=0.012519,0.026436&t=h&hq=visa&hnear=Ashburn,+Loudoun,+Virginia&fll=39.050269,-77.44488&fspn=0.012465,0.026436&z=16

[Stephen Gornick]

In case anyone is curious here is where the data center is located:

And the satellite view of the building at that location:



Maybe they have a couple backups for redundancies, but they don't have the tens of thousands of backups like Bitcoin does:
 - http://www.weusecoins.com/globe
 - https://blockchain.info/nodes-globe

Incidentally, details on that data breach exposing data fro 1.5 million credit card and debit card accounts:
 - https://bitcointalk.org/index.php?topic=74744