Thoughts on modifying the bitcoin codebase to implement a complementary currency

[nereer]

Hi Guys

I am basically only a  hobbyist coder, and I am interested if anyone who knows the codebase comment on the following:

Bitcoin provides the following:

a) A secure peer-to-peer digital currency with no central server
b) Controlled and predictable algorithmic growth in the money supply asymptotically approaching a known maximum
c) Floating exchanges to and from bitcoin
d) A potentially high degree of anonymity
e) A mechanism for making and validating transactions without a central authority

From a Complementary Currency (CC) point of view, we want everything here except b & d. (b) is a problem because in a CC system you need a central issuing authority, with the ability to control the money supply to some extent (my thoughts in this below). (d) is problematic, but perhaps not a deal-breaker, because we want to inspire confidence in the system and avoid accusations of illegal activity.

(b) Would it be possible to change the money creation element of bitcoin so that a central authority could create credit as well as that created by mining? In this scenario the monetary authority would create credit for specific projects, and also run a mining operation to resolve transactions on the network, with the payout for mining being tuned so that it covers the cost of running the hardware (or slightly more than that). This would discourage profiteering but allow enthusiasts to take part if they are motivated to do so.

(d) I presume it would be relatively easy to assign names to wallet addresses; I suppose the issue would be around making sure this was done in an honest manner. Perhaps making the issuing authority the only ones who can create addresses? This has the negative element of not allowing one user of the system to 'recruit' a new user without recourse to the issuing authority. An invite system for trusted users?

(c) exchanges between BTC and CC are not a priority until the CC finds a value

Any thoughts, esp with reference to the code, would be appreciated. thanks

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[codemojo]

Why would I trust this central authority of your new system?

[Garrett Burgwardt]

This is something you are more than free to implement on your own and see if it takes off- good luck

But not something to modify the stock bitcoin protocol for.

[nereer]

This is something you are more than free to implement on your own and see if it takes off- good luck

But not something to modify the stock bitcoin protocol for.

of course not!
this idea runs contradictory to most of the principles of bitcoin. it is different entirely and will be developed separately. I am just wondering what parts of bitcoin would need to be modified, how difficult would this be? etc.

[Gavin Andresen]

If I were going to implement it...  hmm...

I think I'd just special-case the genesis block, so it has a value out of, oh, I dunno, 20 million CompleCoins.  Then maybe fix the mining reward to something small and constant (say 0.001 CompleCoin per block, forever-- or whatever you like).

The central authority would create the genesis block, and so would have 20 million CompleCoins that it could issue (aka spend) however it pleased.

The risk would be the central issuer ever losing control of its wallet/private key.  That risk could be mitigated a little bit by occasionally changing the key by spending all of the non-issued coins to a new address in a new, secure wallet somewhere and waiting a few blocks for confirmation.

I'm having lunch today with somebody else who is interested in using bitcoin tech for a centrally issued alternative currency, so I've been thinking a bit about it...

[nereer]

If I were going to implement it...  hmm...

I think I'd just special-case the genesis block, so it has a value out of, oh, I dunno, 20 million CompleCoins.  Then maybe fix the mining reward to something small and constant (say 0.001 CompleCoin per block, forever-- or whatever you like).

The central authority would create the genesis block, and so would have 20 million CompleCoins that it could issue (aka spend) however it pleased.

The risk would be the central issuer ever losing control of its wallet/private key.  That risk could be mitigated a little bit by occasionally changing the key by spending all of the non-issued coins to a new address in a new, secure wallet somewhere and waiting a few blocks for confirmation.

Yes, this all sounds feasible enough.

What about the danger of other miners spoofing/manipulating the network? If the value of CompCoins is really low it would be a disincentive to attack but perhaps they could run a different client and change some of the core parameters, because they will have the majority of the peers?

I am worried about the implications of having a p2p currency that will only be used by perhaps thousands of people. The processing power to support transactions on a network that size would be fairly cheap, but if you ended up competing with huge miners/botnets, what would happen then?
 

I'm having lunch today with somebody else who is interested in using bitcoin tech for a centrally issued alternative currency, so I've been thinking a bit about it...

I would be very interested to hear what you come up with!

[Mike Hearn]

I guess I don't see the point. If you want a central bank issued currency with strongly identified participants, you can just use a database (or dollars). The complexity of BitCoin is just obfuscation at that point. It doesn't really make sense that you'd trust a central bank to issue the currency and trusted identities but not track who owns what.

[nereer]

I guess I don't see the point. If you want a central bank issued currency with strongly identified participants, you can just use a database (or dollars). The complexity of BitCoin is just obfuscation at that point.

have you read up on LETS or Complementary Currencies? It's not quite a central bank, more of an issuing authority. There are other software implementations of these systems out there, but they have never been proven to work, whereas bitcoin does work, and this will make a big difference in trying to convince those who are sceptical.  Added to that the fact that there is a lot of innovation in the bitcoin area, and some of these advances could be very useful to a system that was similarly designed.

It doesn't really make sense that you'd trust a central bank to issue the currency and trusted identities but not track who owns what.

actually the transactions would have to be tracked. all transactions would have to be public. that is one of the technical issues I am talking about (see above)

at the moment I would like to find out how it would be possible and not get bogged down in doctrinaire debates

[nereer]

Gavin did you come up with anything at your lunch the other day?

I think the money creation aspect is at least provisionally answered, but what about identifying users of the network?

One of the rules of the proposed complementary currency is that the users are not anonymous. I think having users centrally registered is pretty cumbersome but I don't think that can be avoided; would it be possible to allow anyone to register a new account/wallet but not be able to make transactions over a certain amount/week until fully registered? This would allow a user to pay for something relatively small with CompCoin and then register fully later. This would help adoption since the user wouldn't have to go through a cumbersome process of filling out forms before seeing the benefit of the system first hand.

[dacoinminster]

If you want to make a complementary currency, here's one for you: StableCoin.

Bitcoin is awesome if you want to speculate on the future of bitcoin, but that volatility makes the currency less useful for the everyday transactions it was designed for.

Stablecoin could be pegged to the USD, but backed by bitcoin and bitcoin speculation. For instance, I want to buy and sell S&P 500 futures using digital currency, but my profits and losses are obliterated by the wild bitcoin fluctuations. So I buy some stablecoins, which I do my business in, then cash out with my 2% winnings without worrying about what bitcoin values might do in the meantime.

A Stablecoin would just be an enforceable contract between me and a bitcoin speculator. The contract would be an agreement for me to sell bitcoins to the speculator at a set price in the future. I owe the bitcoins, and the speculator owes USD. I get protection from price swings, the speculator gets to profit from bitcoin price increases.

This contract could be settled entirely in bitcoins. For instance, the contract could be that I give the speculator 1 bitcoin on July 1st. The speculator agrees to give me $100 worth of bitcoins on July 1st. I now have a bitcoin which is worth $100, no matter what bitcoin prices do in the future. If the price on July 1st is $50, the speculator owes me 2 BTC. If the price is $1000, the speculator only owes me 0.1 BTC.

I really don't have any idea what protocol would be required to do this, enforce the contracts, etc, but I believe there will be a lot of demand for something like this in the future.

[nereer]

If you want to make a complementary currency, here's one for you: StableCoin.

Bitcoin is awesome if you want to speculate on the future of bitcoin, but that volatility makes the currency less useful for the everyday transactions it was designed for.

Stablecoin could be pegged to the USD, but backed by bitcoin and bitcoin speculation. For instance, I want to buy and sell S&P 500 futures using digital currency, but my profits and losses are obliterated by the wild bitcoin fluctuations. So I buy some stablecoins, which I do my business in, then cash out with my 2% winnings without worrying about what bitcoin values might do in the meantime.

A Stablecoin would just be an enforceable contract between me and a bitcoin speculator. The contract would be an agreement for me to sell bitcoins to the speculator at a set price in the future. I owe the bitcoins, and the speculator owes USD. I get protection from price swings, the speculator gets to profit from bitcoin price increases.

This contract could be settled entirely in bitcoins. For instance, the contract could be that I give the speculator 1 bitcoin on July 1st. The speculator agrees to give me $100 worth of bitcoins on July 1st. I now have a bitcoin which is worth $100, no matter what bitcoin prices do in the future. If the price on July 1st is $50, the speculator owes me 2 BTC. If the price is $1000, the speculator only owes me 0.1 BTC.

I really don't have any idea what protocol would be required to do this, enforce the contracts, etc, but I believe there will be a lot of demand for something like this in the future.

a very interesting idea -

/tries to re-rail the thread

my main question atm is about identity on the network:

One of the rules of the proposed complementary currency is that the users are not anonymous. I think having users centrally registered is pretty cumbersome but I don't think that can be avoided; would it be possible to allow anyone to register a new account/wallet but not be able to make transactions over a certain amount/week until fully registered? This would allow a user to pay for something relatively small with CompCoin and then register fully later. This would help adoption since the user wouldn't have to go through a cumbersome process of filling out forms before seeing the benefit of the system first hand.

[FooDSt4mP]

Regarding identity: Why not just create a web service to handle mapping an email address to a bitcoin address?  Then, you can add a little code to the GUI to query the webservice for the bitcoin address when the user puts in an email address.

[nereer]

Regarding identity: Why not just create a web service to handle mapping an email address to a bitcoin address?  Then, you can add a little code to the GUI to query the webservice for the bitcoin address when the user puts in an email address.

Sure that works, but it won't be able to make sure that everyone on the system is identified, since a user can create as many addresses as they want.

What kind of scope is there for managing address/wallet creation?

[Gavin Andresen]

What kind of scope is there for managing address/wallet creation?

If you're willing to muck with the transaction processing code, you could only allow transactions to addresses that have been created and blessed by the Central Authority.  You'd have to also teach the wallet code not to create lots of addresses, but if you're going to require users to register and not be anonymous you might as well centrally create and issue them their wallets.

You then need a mechanism to broadcast new, blessed public keys to the entire network, but that might be as simple as generating a transaction from a baked-in blessed address (owed by the Central Authority) to the newly created blessed address.

Implementing and debugging would be a lot of work, and I'd be nervous about neglecting some little detail and leaving the system open to hacks (Bitcoin is nice because so many people are extremely motivated to find any chink in the system and either exploit it or patch it-- a small complementary currency wouldn't have that advantage).  But it could be done.

[marcus_of_augustus]

Central issuing authority. Central tracking ... what's the point? We already have facist money and we know it doesn't work.

Fungibility is an essential quality of money. If you make tokens traceable then you lose fungibility since some tokens become 'more equal' than others.

What you are proposing is a poor man's money for the oppressed. (Removing politics from the technology of monetary systems is not an option.) Fine hobby you got there, but if that's what drives you .... who are we?

[nereer]

Central issuing authority. Central tracking ... what's the point? We already have facist money and we know it doesn't work.

Fungibility is an essential quality of money. If you make tokens traceable then you lose fungibility since some tokens become 'more equal' than others.

What you are proposing is a poor man's money for the oppressed. (Removing politics from the technology of monetary systems is not an option.) Fine hobby you got there, but if that's what drives you .... who are we?

I am talking about a LETS or Complementary Currency system, which is not government issued or backed. The main benefit of these systems over bitcoin or government issued fiat is that you can create liquidity for no cost. There has never been an example of a country with a state-run LETS/Complementary Currency. This is most certainly *not* fascist money - these ideas are nearly exclusively promoted by left wing groups.

Perhaps you misunderstand the workings of these systems?

[marcus_of_augustus]

Central issuing authority. Central tracking ... what's the point? We already have facist money and we know it doesn't work.

Fungibility is an essential quality of money. If you make tokens traceable then you lose fungibility since some tokens become 'more equal' than others.

What you are proposing is a poor man's money for the oppressed. (Removing politics from the technology of monetary systems is not an option.) Fine hobby you got there, but if that's what drives you .... who are we?

I am talking about a LETS or Complementary Currency system, which is not government issued or backed. The main benefit of these systems over bitcoin or government issued fiat is that you can create liquidity for no cost. There has never been an example of a country with a state-run LETS/Complementary Currency. This is most certainly *not* fascist money - these ideas are nearly exclusively promoted by left wing groups.

Perhaps you misunderstand the workings of these systems?

Perhaps, but I don't think so. Left wing groups love centralising things ... the only problem is that when you have a big pot of centralised power/money the facists show up soon after and co-opt the whole thing to stifle liberty. How are you going to stop that from happening?

For salient examples, think Federal Reserve, Fannie Mae, Freddie Mac, Social Security, Govt. pension funds, state insurance, the list is nearly endless.

The main benefit of these systems over bitcoin or government issued fiat is that you can create liquidity for no cost

Colour me skeptical, money costs, no free lunch.

[nereer]

Central issuing authority. Central tracking ... what's the point? We already have facist money and we know it doesn't work.

Fungibility is an essential quality of money. If you make tokens traceable then you lose fungibility since some tokens become 'more equal' than others.

What you are proposing is a poor man's money for the oppressed. (Removing politics from the technology of monetary systems is not an option.) Fine hobby you got there, but if that's what drives you .... who are we?

I am talking about a LETS or Complementary Currency system, which is not government issued or backed. The main benefit of these systems over bitcoin or government issued fiat is that you can create liquidity for no cost. There has never been an example of a country with a state-run LETS/Complementary Currency. This is most certainly *not* fascist money - these ideas are nearly exclusively promoted by left wing groups.

Perhaps you misunderstand the workings of these systems?

Perhaps, but I don't think so. Left wing groups love centralising things ... the only problem is that when you have a big pot of centralised power/money the facists show up soon after and co-opt the whole thing to stifle liberty. How are you going to stop that from happening?

For salient examples, think Federal Reserve, Fannie Mae, Freddie Mac, Social Security, Govt. pension funds, state insurance, the list is nearly endless.

The main benefit of these systems over bitcoin or government issued fiat is that you can create liquidity for no cost

Colour me skeptical, money costs, no free lunch.

I am beginning to suspect that you don't know anything about LETS / CC systems.

If you are an anarchist that does not believe that any man-made systems can benefit society as a whole, then that is your ultimate view and there really is no point debating the details. OTOH if you want to go ahead and read up on LETS/CC systems, I would appreciate your informed opinion.

[marcus_of_augustus]

If you are an anarchist that does not believe that any man-made systems can benefit society as a whole, then that is your ultimate view and there really is no point debating the details. OTOH if you want to go ahead and read up on LETS/CC systems, I would appreciate your informed opinion.

I'm getting pretty fed up with people telling what I am and am not and what I believe and what I don't. I'll keep my informed opinion to myself for now, thanks.

PS: anything the UN has touched has been a disaster, "you shall know them by their fruits", comes to mind.

[Vering]

@topic

Bitcoins blockchain stuff is only necessary because it doesn't have a central authority.
You might want to change the p2p aspect to just connect to the central issuing server, which will create new blocks when new transactions come in.
This will give lower transaction times and lower (nonexistent) mining costs and full control over inflation, with no overtaking from others possible.
On the downside, you are probably a little more vulnerable against ddos attacks.
You can also keep the p2p aspect, but then you practically loose protection against double spending.

[nereer]

@topic

Bitcoins blockchain stuff is only necessary because it doesn't have a central authority.
You might want to change the p2p aspect to just connect to the central issuing server, which will create new blocks when new transactions come in.
This will give lower transaction times and lower (nonexistent) mining costs and full control over inflation, with no overtaking from others possible.
On the downside, you are probably a little more vulnerable against ddos attacks.
You can also keep the p2p aspect, but then you practically loose protection against double spending.

This is a serious point. Just to simplify what I think is your core question (correct me if I am wrong):

Why use bitcoin if there is a central issuing authority? Surely you could just use one of the proprietary systems that are out there, which are non-p2p and do exactly what you want?

Two reasons come to mind straight away:

1. CC/LETS systems have been debated and discussed by useless hippy types since time immemorial. They have rarely managed to get their ideas implemented for various reasons, but probably the biggest is end-user cynicism. Most people are incredibly skeptical of these systems; they have a very hard time imagining that they would work. And along came bitcoin and proved that a digital currency could and does work. This is like gold dust for those of us who are advocating CC/LETS systems.

2. There is a huge amount of development in the bitcoin community. If this proposed CompCoin was to share a similar codebase, many of the more useful projects could be incorporated fairly easily into it.

Complementary Currencies fill a need that bitcoin does not, and I believe that a CompCoin system could go hand-in-hand with adoption of bitcoin, as they provide different benefits. If a group of enthusiasts from the bitcoin community were to get involved we could create a codebase/template for setting up complementary/local currencies, that could be tailored to local conditions, it could help the development of bitcoin throughout the world, and help local communities build their economies without the need for government grants/funding.

[marcus_of_augustus]

Success has many fathers, failure is an orphan.

[Anonymous]

Cant you just create a version of bitcoin with all the coins already generated...then issue an official address linked to each person ?

Then the central wallet is the only one that can issue coins to people.

*scratches head.

Edit : Can you create a client that doesnt mine ?  Then that means the coins are only as secure as the server/site they are hosted on.

[matslats]

Hi,
I know what you mean about LETS groups, I've been working the last 3 years to serve them.
http://drupal.org/project/mutual_credit
This strategy is starting to pay off.

I do not think that these groups will be interested in bitcoin because:
-it's complicated
-it is far removed from simple mutual credit which many of them don't really understand.
-these groups prefer to operate in plain sight, than to use encryption
-they have no resources for accounting systems

Bitcoin is already a complementary currency. It just needs to find its niche. Probably the niche is close to where it is now, amongst techies and IT workers. I suggest you concentrate on filling this global niche.

However if anyone does want to work on Drupal for local communities, please get in touch.
Matthew

[nereer]

-it's complicated

complicated is relative, this is a complicated world. I am not sure that this is a disadvantage, you could just as well say bitcoin won't take off because it is complicated.

-it is far removed from simple mutual credit which many of them don't really understand.

The plan would be to make the frontend as simple as possible, and follow as many Mutual Credit precedents as possible

-these groups prefer to operate in plain sight, than to use encryption

I agree, which is why identification of users is an important factor. Encryption of the block chain etc. is part of bitcoin security and doesn't have anything to do with whether transactions are transparent or not.

-they have no resources for accounting systems

Indeed. This could be a problem, but my thoughts are that these systems will be build for bitcoin in due course.

I am still undecided whether there really is a point in trying to do this. There are other systems, that may well work (I have still yet to review them). My main motivation is to leverage the popularity of bitcoin to drive adoption of a Complementary Currency, my secondary is that bitcoin is going to have a huge amount of technical and other solutions to make digital currency more usable (e.g coincards, POS machines etc.)

I will have a look at your site when I get a chance. Thanks for your input.

[markm]

What others have been doing toward similar ends is to look forward to the so called "thin client" as the end-user software.

Your problems are all being projected out to the user end mostly because currenct Bitcoin clients are so called "thick clients".

Search the forum for references to these two flavours of client.

Basically the approach I have been seeing people use, and helping people test and use, amounts to only the blessed outlets, the mint itself and any authorised agents of the mint, running the current type of Bitcoin software.

Apparently it is technically feasible for "miners" to operate through "pools" wherein only the "pools" know what blockchain is being worked and what the ports and IP-addresses and passwords and so on for the network are. So if for any reason at some point it becomes necessary to hire processing power, hashing can be hired out to "miners" via blind pools where the miners need not know what blockchain(s) the pools are working nor what currencies nor how many coins the pool gets per block solved, all the miners need to know is how much they are to be paid per unit of work, in whatever currency they wish to be paid in.

So if at some point the network decides to open itself to the public, or if enough nodes (hitherto-authorised outlets) go rogue trying to take over the blockchain to make it necessary for extra processin power to be brought in, it can be bought from miners who have no knowledge of the currency in question they simply do hashes for some form of payment they like to be paid in.

This could work for example for something like a chain of Canadian Tire shops. Each shop could run a node, all transactions can be public if desired, each node has its map of which customer each account in that node's wallet belongs to so the identity problem is solved. The key here is simply to not let anyone except legitimate Canadian Tire stores connect to the network of Canadian Tire Coin nodes.

This is the approach being used so far by all the various bitcoin-variants my NickelBot and other IRC bots are working with. End users interface via the IRC bots not via bitcoind or bitcoin client.

-MarkM-