[XMR] Monero Speculation

[jay8291]

BTC mempool size has crashed since February.  Smoothed xns/day is trending down.  It seems clear that the tight hold on BTC is increasing.  Come the fork, you may have a hard time finding anyone willing to spend BTC for a couple of weeks at least.

I am increasingly convinced that this will spike XMR.  How else can you buy fentanyl on alphabay?  Opiates are the quintessence of an inelastic demand driver - just ask Stringer Bell.  Methinks I should go all-in again.

You are convinced the fork is inevitable?   I think even the possibility is destabilising - but with BTC at this price, it seems to not be priced in, indicating IMO that it is not thought to be definite by the market.

I am not saying you're wrong, but I wonder how you feel it's a done deal it will happen.

Fork wont happen. BU needs 75%, which it will never get. On the other hand Segwit wont get 95% too. So UASF will happen. I dont know its good or Bad, But its good BU will lose. BU is just some Big Pools wanting to earn More Fees with Blocksize Increase. Their Main concern is earning fees, not the Blocksize problem.

[bitebits]

[...] But its good BU will lose. BU is just some Big Pools wanting to earn More Fees with Blocksize Increase. Their Main concern is earning fees, not the Blocksize problem.

Can we please have this BU/Core is good/bad discussion elsewhere?

Fees are just a side effect of the actual usage of a blockchain network. So miners their concern is that their mined blockchain is actually being used as much and by as many as possible, not the other way around.

Artificially limiting capacity to increase fees is very short sighted. I am sure miners are more clever than that, these are professional business nowadays. That is why the elastic non arbitrary blocksize of Monero is such a great and very valuable feature.

[Hueristic]

Fees are just a side effect of the actual usage of a blockchain network. ...

Correct, which is why Monero got it right and has a dynamic fee system that will make fees cheaper as usage increases (inversely proportional), genius work ArticMine.

I'm still confused on why this does not open an attack vector with chain spam? Is there a critical mass point?

Sorry but I stopped reading progress when I couldn't get the info I needed to vet the RPC (at least the "Scientists" found that vector afterwards). Is there a quick synopsis of this discussion, I can never find irc logs.

[DaveyJones]

Fees are just a side effect of the actual usage of a blockchain network. ...

Correct, which is why Monero got it right and has a dynamic fee system that will make fees cheaper as usage increases (inversely proportional), genius work ArticMine.

I'm still confused on why this does not open an attack vector with chain spam? Is there a critical mass point?

Sorry but I stopped reading progress when I couldn't get the info I needed to vet the RPC (at least the "Scientists" found that vector afterwards). Is there a quick synopsis of this discussion, I can never find irc logs.

maybe you should PM ArticMine and ask him directly.

[rangedriver]

[Hueristic]

Fees are just a side effect of the actual usage of a blockchain network. ...

Correct, which is why Monero got it right and has a dynamic fee system that will make fees cheaper as usage increases (inversely proportional), genius work ArticMine.

I'm still confused on why this does not open an attack vector with chain spam? Is there a critical mass point?

Sorry but I stopped reading progress when I couldn't get the info I needed to vet the RPC (at least the "Scientists" found that vector afterwards). Is there a quick synopsis of this discussion, I can never find irc logs.

maybe you should PM ArticMine and ask him directly.

He reads this thread so I'm sure he'll drop a quick synopsis.

[ArticMine]

Fees are just a side effect of the actual usage of a blockchain network. ...

Correct, which is why Monero got it right and has a dynamic fee system that will make fees cheaper as usage increases (inversely proportional), genius work ArticMine.

I'm still confused on why this does not open an attack vector with chain spam? Is there a critical mass point?

Sorry but I stopped reading progress when I couldn't get the info I needed to vet the RPC (at least the "Scientists" found that vector afterwards). Is there a quick synopsis of this discussion, I can never find irc logs.

maybe you should PM ArticMine and ask him directly.

He reads this thread so I'm sure he'll drop a quick synopsis.

I covered this type of attack in this thread back in January 2016.

ArticMine PMed me after I wrote that flaming post, and said he would reply after studying my posts. He has not yet replied. Does that mean I am correct and there is no solution for Monero. I think so.

It is fundamental. Afaics, you'd have to completely rewrite Moaneuro.

Rewrite Monero, is not necessary at all but some documentation on how the Cryptonote adaptive blocksize limits actually work is needed, especially given the formula in section 6.2.3 of the Cryptonote Whitepaper is wrong. https://cryptonote.org/whitepaper.pdf. My response will come in time.

I will start by examining the Cryptonote Penalty Function for oversize blocks. This is critical to understand any form of spam attack against a Cryptonote coin. From the Cryptonote whitepaper I cited above the penalty function is:

Penalty = BaseReward (BlkSize / M_N - 1)²

The new reward is:

NewReward = BaseReward - Penalty

Where M_N is the median of the blocksize over the last N blocks
BlkSize is the size of the current block
BaseReward is the reward as per the emission curve or where applicable the tail emission
NewReward is the actual reward paid to the miner
The Maximum allowed blocksize, BlkSize, is 2M_N
The penalty is only applied when BlkSize > (1 + B_min) M_N Where 0 < B_min < 1 In the Cryptonote whitepaper B_min = 0.1.
 
The error in the Cryptonote Whitepaper was to set NewReward = Penalty

For simplicity I will define:
BlkSize = (1+B) M_N
BaseReward = R_base
Penalty (for a given B) = P_B
NewReward (for a given B) = R_B

The penalty for a given B becomes:
P_B = R_baseB²
While the new reward for a given B becomes:
R_B = R_base(1 - B²)
The first derivative of P_B with respect to B is
dP_B / dB = 2R_baseB

In order to attack the coin by bloating the blocksize the attacker needs to cause at least over 50% of the miners to mine oversize blocks and for an expedient attack close to 100% or the miners to mine oversize blocks. This attack must be a maintained over a sustained period of time and more importantly must be maintained in order to keep the oversized blocks, since once the attack stops the blocks will fall back to their normal size.  There are essentially two options here:

1) A 51% attack. I am not going to pursue this for obvious reasons.

2) Induce the existing miners to mine oversize blocks. This is actually the more interesting case; however after cost analysis it becomes effectively a rental version of 1 above. Since the rate of change (first derivative) of P_B is proportional to B the most effective option for the attacker is to run the attack with B = 1. The cost of the attack has as a lower bound R_base but would be higher, and proportional to, R_base  because miners will demand a substantial premium over the base reward to mine the spam blocks due to the increased risk of orphan blocks as the blocksize increases and competition from legitimate users whose cost per KB for transaction fees needed to compete with the attacker will fall as the blocksize increases. The impact on the coin is to stop new coins from being created while the attack is going on. These coins are replaced by the attacker having to buy coins on the open market in order to continue the attack. The impact of this is to further increase the costs to the attacker.

It at this point where we see the critical importance of a tail emission since if R_base = 0 this attack has zero cost and the tragedy of the commons actually occurs. This is the critical difference between those Cryptonote coins that have a tail emission, and have solved the problem, such as Monero and those that do not, and will in a matter of time become vulnerable, such as Bytecoin.

The fee design in Monero with the tx fee per byte proportional to the block reward divided by the median blocksize is based upon this analysis. There is a critical consequence of this that is very relevant to price speculation. While it is relatively straight forward to retrofit coins with a fixed minimum tail emission such as Ethereum, Dogecoin and Friecoin with an adaptive blocksize similar to that in Monero. There is no solution that I am aware of for coins with a falling block reward such as Bitcoin, Litecoin, Ethereum Classic and Dash. In my opinion the real genius here was adding the tail emission to Monero when it was forked from Bytecoin back in 2014. This was before my involvement with the Monero project.

Edit 1: The tail emissions in Monero, Ethereum, and Dogecoin are generated by inflation. In the case of Freicoin the tail emission is generated by demurrage. The Freicoin case is interesting since it can be a model for securing sidechains with a fixed maximum number of coins. If the sidechain is intended to be used for active transactions with a high velocity of money as opposed to long term wealth preservation then demurrage is a very viable option.

Edit 2: The tail emission in Monero of 0.6 XMR per block produces a maximum inflation rate of just under 1%. This is below the historical inflation rate of gold. So while Monero has a inflation rate to secure the coin it also has a "hardness" that is at least as strong as that of gold. After all gold is the "gold standard" when it comes to hard money. If we were to compare the tail emission in Monero to Bitcoin, the rough equivalent would be a tail emission in Bitcoin of approximately 3 XBT per block.

Edit 3: One can argue that the fee design in Monero is based upon an analysis that identifies a serious flaw in coins with a falling block reward such as Bitcoin, Litecoin, Ethereum Classic and Dash, since the solution of a "fee market" that replaces the block reward has not been found. The eventual need for such a "fee market" is implicit in these coins' design  If, in order for the coin to scale, the total fees per block have to be proportional to the block reward then the message becomes that such a "fee market" is in fact incompatible with scaling.

[aminorex]

Unless the neckline is descending, H & S is indistinguishable from consolidation before an up-leg.

[sundaymorning]

Can someone explain why/how Monero is/isn't scalable?

[cAPSLOCK]

Can someone explain why/how Monero is/isn't scalable?

Monero is quite scalable.   For example having a dynamic block size allows it to adjust to the sorts of issues that BTC is facing with grace.

The one caveat is the large (kb) size of it's blocks.  But this is constantly being mitigated by Moore's Law.

[rangedriver]

Unless the neckline is descending, H & S is indistinguishable from consolidation before an up-leg.

As usual I'm speculating strictly within the context of voodoo future perception, as opposed to confirming confirmationals.

[Hueristic]

Fees are just a side effect of the actual usage of a blockchain network. ...

Correct, which is why Monero got it right and has a dynamic fee system that will make fees cheaper as usage increases (inversely proportional), genius work ArticMine.

I'm still confused on why this does not open an attack vector with chain spam? Is there a critical mass point?

Sorry but I stopped reading progress when I couldn't get the info I needed to vet the RPC (at least the "Scientists" found that vector afterwards). Is there a quick synopsis of this discussion, I can never find irc logs.

maybe you should PM ArticMine and ask him directly.

He reads this thread so I'm sure he'll drop a quick synopsis.

I covered this type of attack in this thread back in January 2016.

ArticMine PMed me after I wrote that flaming post, and said he would reply after studying my posts. He has not yet replied. Does that mean I am correct and there is no solution for Monero. I think so.

It is fundamental. Afaics, you'd have to completely rewrite Moaneuro.

Rewrite Monero, is not necessary at all but some documentation on how the Cryptonote adaptive blocksize limits actually work is needed, especially given the formula in section 6.2.3 of the Cryptonote Whitepaper is wrong. https://cryptonote.org/whitepaper.pdf. My response will come in time.

I will start by examining the Cryptonote Penalty Function for oversize blocks. This is critical to understand any form of spam attack against a Cryptonote coin. From the Cryptonote whitepaper I cited above the penalty function is:

Penalty = BaseReward (BlkSize / M_N - 1)²

The new reward is:

NewReward = BaseReward - Penalty

Where M_N is the median of the blocksize over the last N blocks
BlkSize is the size of the current block
BaseReward is the reward as per the emission curve or where applicable the tail emission
NewReward is the actual reward paid to the miner
The Maximum allowed blocksize, BlkSize, is 2M_N
The penalty is only applied when BlkSize > (1 + B_min) M_N Where 0 < B_min < 1 In the Cryptonote whitepaper B_min = 0.1.
 
The error in the Cryptonote Whitepaper was to set NewReward = Penalty

For simplicity I will define:
BlkSize = (1+B) M_N
BaseReward = R_base
Penalty (for a given B) = P_B
NewReward (for a given B) = R_B

The penalty for a given B becomes:
P_B = R_baseB²
While the new reward for a given B becomes:
R_B = R_base(1 - B²)
The first derivative of P_B with respect to B is
dP_B / dB = 2R_baseB

In order to attack the coin by bloating the blocksize the attacker needs to cause at least over 50% of the miners to mine oversize blocks and for an expedient attack close to 100% or the miners to mine oversize blocks. This attack must be a maintained over a sustained period of time and more importantly must be maintained in order to keep the oversized blocks, since once the attack stops the blocks will fall back to their normal size.  There are essentially two options here:

1) A 51% attack. I am not going to pursue this for obvious reasons.

2) Induce the existing miners to mine oversize blocks. This is actually the more interesting case; however after cost analysis it becomes effectively a rental version of 1 above. Since the rate of change (first derivative) of P_B is proportional to B the most effective option for the attacker is to run the attack with B = 1. The cost of the attack has as a lower bound R_base but would be higher, and proportional to, R_base  because miners will demand a substantial premium over the base reward to mine the spam blocks due to the increased risk of orphan blocks as the blocksize increases and competition from legitimate users whose cost per KB for transaction fees needed to compete with the attacker will fall as the blocksize increases. The impact on the coin is to stop new coins from being created while the attack is going on. These coins are replaced by the attacker having to buy coins on the open market in order to continue the attack. The impact of this is to further increase the costs to the attacker.

It at this point where we see the critical importance of a tail emission since if R_base = 0 this attack has zero cost and the tragedy of the commons actually occurs. This is the critical difference between those Cryptonote coins that have a tail emission, and have solved the problem, such as Monero and those that do not, and will in a matter of time become vulnerable, such as Bytecoin.

The fee design in Monero with the tx fee per byte proportional to the block reward divided by the median blocksize is based upon this analysis. There is a critical consequence of this that is very relevant to price speculation. While it is relatively straight forward to retrofit a coin with a fixed minimum tail emission such as Ethereum, Dogecoin or Friecoin with an adaptive blocksize similar to that in Monero. There is no solution that I am aware of for coins with a falling block reward such as Bitcoin, Litecoin, Ethereum Classic or Dash. In my opinion the real genius here was adding the tail emission to Monero when it was forked from Bytecoin back in 2014. This was before my involvement with the Monero project.

Edit 1: The tail emissions in Monero, Ethereum, and Dogecoin are generated by inflation. In the case of Freicoin the tail emission is generated by demurrage. The Freicoin case is interesting since it can be a model for securing sidechains with a fixed maximum number of coins. If the sidechain is intended to be used for active transactions with a high velocity of money as opposed to long term wealth preservation then demurrage is a very viable option.

Edit 2: The tail emission in Monero of 0.6 XMR per block produces a maximum inflation rate of just under 1%. This is below the historical inflation rate of gold. So while Monero has a inflation rate to secure the coin it also has a "hardness" that is at least as strong as that of gold. After all gold is the "gold standard" when it comes to hard money. If we were to compare the tail emission in Monero to Bitcoin, the rough equivalent would be a tail emission in Bitcoin of approximately 3 XBT per block.

Edit 3: One can argue that the fee design in Monero is based upon an analysis that identifies a serious flaw in coins with a falling block reward such as Bitcoin, Litecoin, Ethereum Classic or Dash, since the solution of a "fee market" that replaces the block reward has not been found. The eventual need for such a "fee market" is implicit in these coins' design  If, in order for the coin to scale, the total fees per block have to be proportional to the block reward then the message becomes that such a "fee market" is in fact not possible.

Thanks for this, I missed it in the main thread. I will take some time later and fully digest it as a few questions come to mind, specifically things like when an owner of a botnet sets it to only mine the spammed blocks (and has a large enough stash that they do not need to purchase coins) and blockspamming of small blocks when the variable cost kicks in (not sure when this is happening at all). Anyway when I'm up to it I'll try to fully digest this. I'm going to have to change the simplicity's sake to readabilities sake first. I hate my lack of short term memory, it makes it tough to work with assigned variables.

Also does this "The Maximum allowed blocksize, BlkSize, is 2MN" mean that there is a penalty cap? So as time goes on the cost would be lower in proportion?

[ArticMine]

...

Thanks for this, I missed it in the main thread. I will take some time later and fully digest it as a few questions come to mind, specifically things like when an owner of a botnet sets it to only mine the spammed blocks (and has a large enough stash that they do not need to purchase coins) and blockspamming of small blocks when the variable cost kicks in (not sure when this is happening at all). Anyway when I'm up to it I'll try to fully digest this. I'm going to have to change the simplicity's sake to readabilities sake first. I hate my lack of short term memory, it makes it tough to work with assigned variables.

On thing to keep in mind here is that when the cost of the spam attack becomes comparable to that of a 51% attack then of course the spam attack can become possible. 

[Hueristic]

...

Thanks for this, I missed it in the main thread. I will take some time later and fully digest it as a few questions come to mind, specifically things like when an owner of a botnet sets it to only mine the spammed blocks (and has a large enough stash that they do not need to purchase coins) and blockspamming of small blocks when the variable cost kicks in (not sure when this is happening at all). Anyway when I'm up to it I'll try to fully digest this. I'm going to have to change the simplicity's sake to readabilities sake first. I hate my lack of short term memory, it makes it tough to work with assigned variables.

On thing to keep in mind here is that when the cost of the spam attack becomes comparable to that of a 51% attack then of course the spam attack can become possible. 

Thx, yup. I ninja'd a question but you answered before I saved lol.

 Does "The Maximum allowed blocksize, BlkSize, is 2MN" mean there is a penalty cap? Therefore as time progresses and blocksize naturally increases this will become cheaper?

[aminorex]

You are convinced the fork is inevitable?   I think even the possibility is destabilising - but with BTC at this price, it seems to not be priced in, indicating IMO that it is not thought to be definite by the market.

I am not saying you're wrong, but I wonder how you feel it's a done deal it will happen.

I am not privy to private dealings between the players.  I am only looking at the exoteric game.  I can't see any way in which miners can be incentivized to stay with core, in the current political environment.  They will vote to maximize their utility under discounting, and that seems clearly to mean BTU.  The fact that ETC + ETH was profitable is a strong reinforcer.  I am inclined to buy BTU futures below 200USD.  And yes, that's a very binary bet, but at 5:1 it is pretty compelling, I think.

[ArticMine]

...

Thx, yup. I ninja'd a question but you answered before I saved lol.

 Does "The Maximum allowed blocksize, BlkSize, is 2MN" mean there is a penalty cap? Therefore as time progresses and blocksize naturally increases this will become cheaper?

It is actually a cap on the rate of growth of the blocksize, once the penalty equals the block reward.

[Hueristic]

...

Thx, yup. I ninja'd a question but you answered before I saved lol.

 Does "The Maximum allowed blocksize, BlkSize, is 2MN" mean there is a penalty cap? Therefore as time progresses and blocksize naturally increases this will become cheaper?

It is actually a cap on the rate of growth of the blocksize, once the penalty equals the block reward.

So it is a limit on blocksize growth based on the median which will change with the median as that floats, correct?

[ArticMine]

...

So it is a limit on blocksize growth based on the median which will change with the median as that floats, correct?

Yes

[Hueristic]

...

So it is a limit on blocksize growth based on the median which will change with the median as that floats, correct?

Yes

thx again. I'll see if I can get some time to completely understand it. Gotta do mundane shit like put a mirror on the wall and I missed my cut so now it's gonna be a few mirrors. Lol

[kurious]

You are convinced the fork is inevitable?   I think even the possibility is destabilising - but with BTC at this price, it seems to not be priced in, indicating IMO that it is not thought to be definite by the market.

I am not saying you're wrong, but I wonder how you feel it's a done deal it will happen.

I am not privy to private dealings between the players.  I am only looking at the exoteric game.  I can't see any way in which miners can be incentivized to stay with core, in the current political environment.  They will vote to maximize their utility under discounting, and that seems clearly to mean BTU.  The fact that ETC + ETH was profitable is a strong reinforcer.  I am inclined to buy BTU futures below 200USD.  And yes, that's a very binary bet, but at 5:1 it is pretty compelling, I think.

Interesting, and thanks for this - but personally I can't see a contentious fork doing anything other than damage to BTC. I am unsure it is comparable to ETH / ETC and that the split will be necessarily profitable, because of the 'only 21m coins ever' will (to the outside world and MSM) look like a broken promise.

Also the forkopalypse will be potentially catastrophic to the whole market as former 'certainties' may seem so undermined as to see a flight of capital away from crypto - certainly at least while the split disrupts things.   5:1 is possible, but it's nowhere near that in ETH / ETC (now) and the reputational damage might possibly make the split coin values add up to less than the value of the one BTC pre-split.

I was surprised you seemed so sure, but I do see what you mean and will adjust my risk assessment.  If you're right, of course I hope it does benefit XMR.  The market will adjust to BTC losing it's unassailable right to be the majority of the crypto market cap, yes, but only a few coins can really benefit - and being 'BTC-alike' will not help any coin wishing to position itself as a contender, which in theory means XMR is extremely well placed; hopefully like Mo Farah at back of the leading group of runners keeping calm, waiting for the perfect moment to power up to the front and take the lead.

We live in interesting times.