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Author Topic: United we stand, divided we fall - the coming rise of cryptofiat  (Read 16362 times)
David Latapie
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October 03, 2014, 06:31:26 PM
Last edit: February 07, 2015, 08:57:53 PM by David Latapie
 #1

This is a call to arms.
Cryptoland as a whole is entering into decadence. We are resting on our laurels because BTC reached 1000 dollars and even now it is three times its 2013 ATH.

Delusion of grandeur
While we are partying, the real competition1 is readying its weapons.
What? You really think banksters will disappear,  fiat will disappear, a several century-old institution (fiat currency) will disappear thanks to a 5-year old technology? That some 50 year-old people (maximum, most are in the 20-30's) could change one of the latest powers of nation-states? Even the European Union's euro has a hard time doing it and it is not that big of a change. If fiat exists for so long, it is not only because of the lack of a better technology. It is also because it suits us (mankind). "But again, truth be told...if you're looking for the guilty, you need only look into a mirror."

Quote from: Transhuman Space
Any meme several centuries old is adaptable enough to survive

Radio was supposed to kill newspaper. TV was supposed to kill radio. Internet was supposed to kill TV. See a trend, here? Fact is this is just not how things works. Without going at length about the differences between protocol and symbol (sumbolon), let's just say that centralised money is here to stay. Sure, it will have to negociate its position with decentralised money, like newspaper did with radio and so on, but that's all.
And let me tell you: cryptofiat is a thing to come. Newspaper adapted to the rise of internet by going digital (ebook and apps), because being paper is a protocol. Providing daily written information is a symbol. Symbol don't die, protocols do.
That's the same with fiat. It is a symbol, something that unite people2. Fiat could change its protocol, like moving from arbitrary (decree, fiat) to cryptographically-enforced. Yes, cryptodollar or cryptoeuro or cryptoyuan could very much become a reality; or cryptocredit, if you buy the SF staple of one universal money - doesn't change much, except if you are in the forex or exchange office businesses.

And guess what, nation-states won't have any desire to share power with hippies/hackers using this Bitcoin thing. Once they'll realise prohibition doesn't work and cost them money3 (some are starting to understand it), they will create their own cryptofiat. Nicaragua is doing it and I know some other places are doing it too.
The best way to kill bitcoin and all is to make it irrelevant.
100% premined fiat would not even need to change money creation (a crypto can be infinitely inflationary, like most Peercoin-based cryptos or Dogecoin). On top of it, cryptofiat would make surveillance so much easier. And since blockchain has tremendous uses out of money (see #powerofblockchain on Google+), you can be sure that incentives for moving to "crypto-everyting" will be there. Governement could even encourage it. Every passing year, somewhere in the world a law is promulgated to reduce the amount of cash that can be used for buying something. Connect the dots.

Meanwhile, what we, Cryptolanders, doing? Self-congratulation ("we're gonna kill banksters") and infightings ("my coin is better than thyne"). These are signs of decadence. The Chinese Empire decayed in the middle of the last millenium when it decided that there was nothing interesting outside of its frontiers. And we are far from being the Chinese Empire. We are digging our own hole. Narcissism of small differences. A friend used the word of "crypto-balkanization". That's exactly it.


This is a war and we are soldiers
Now, what can we do?
First, we should both not care too much about infighting (the altcoin war is also Darwinian evolution at work, it has its uses) and at the same time still care enough to remember what really matters. Speaking of that, what does really matters, mmh? You have four hours.

Second, it is easier to win if your competitor lets you win. Build your opponent a golden bridge to retreat across. If a governement can take advantage of crypto (and I already explained it can), make it so that this is a mutually-profitable agreement. Hatred only go that far; negociation goes much farther. Hey, I'm French, I know what I am talking about, we have an A-grade in Stubborness and Stupidity (Africa, Indochina...) whereas the British were much smarter.
Governement wants money and control. Let us do it whilst allowing anyone on an individual basis to opt-out. If we create the tool, it will be possible. If we let the government create it, much less.

Third, read history. Remember WIR. Remember how local currencies die when crisis are over (or sort of). Fiat won't disappear, it will adapt and there is room for non-fiat cryptocurrencies as long as it makes sense. What could an "illegitimate" currency (as in "not backed by governement") be good for? I believe that anonymity is the important thing4. You can be sure that cryptofiat will be traceable. You can also be sure also there will be a need for untraceability. A homeostatic system integrates its own opposition, that's why it is homeostatic. In simpler terms, legality has to tolerate illegality to continue to exist (which doesn't mean that tools useful for illegal action can't be used for legal actions - you do pay your coffee with some quarters, right?)

Quote from: Lord of War
And while the biggest arms dealer in the world is your boss, the President of the United States - who ships more merchandise in a day than I do in a year - sometimes it's embarrassing to have his fingerprints on the guns. Sometimes he needs a freelancer like me to supply opposition forces he can't be seen supplying. You call me evil, but, unfortunately for you, I am a necessary evil.
It would be embarrassing for a government to have his fingerprints on an untraceable currency - after all, if you have nothing to hide, you have no reason to refuse traceability, right? Sometimes a governement needs a freelancer like us.

So stop infighting and look at the real threat. Come on. It would be one of biggest missed deed of our time if open source failed to liberate more than code.

Update: a very interesting reply on the Reddit with particularly insightful remarks; one about the future use of mining (which reminds me how patent transitionned from a defensive weapon to an offensive one) and the second about an essential limitation of PoS.

Quote
"mining will no longer be done for profit, but [...] power."
[...]
PoS coins, fiat coins, always end with centralization because, as I have said, once someone, or some nation, gains majority possession of the units of money, they control the currency forever.

Update 2: How to adapt and change nothing:
First, let's dispense with the idea that they care a great deal about money. They don't. The currency they deal in is power. Money is merely an aspect or symbol of that power. Losing control of it it is catastrophic to the way they currently do business, but if you look at the history of rulership, they're incredibly adaptable. In America, they have turned a nation of renegades and individualists into a sociofascist empire that maintains and appearance of liberty. So, looking to that, how might blockchains be incorporated?

One that I find obvious is that they can hide their legerdemain in plain sight. Instead of fractional reserves, they have an adjustable rate of proof of stake, based on some metric they control. It appears that all money creation is above board and clean... but they control the metric.

I could go on for a while on the ways they might subvert the technology while APPEARING to "fix" the economic system. If they can come off as heroes, then they elevate themselves and again appear to be the benevolent overlords.

Update 3: How a state can destroy Bitcoin and, consequently, Bitcoin requires the implicit approval of a state: The Stateless Currency and the State: An Examination of the Feasibility of a State Attack on Bitcoin. Damn interesting.
And also State-sponsored cryptocurrencies


1. I don't like the word "enemy", it brings hate and I am like Churchill, I don't hate people, I just compete with them.
2. Sumbolon: which unites. Diabolon: which divides.
3. Forbidding prostitution doesn't work but doesn't cost money, for instance.
4. Full disclosure: I am a core team member of Monero, a currency whose main selling point is anonymity.

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October 03, 2014, 06:37:50 PM
 #2

Interesting. Definitely following!

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October 03, 2014, 07:18:53 PM
 #3

Pretty powerful.

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October 03, 2014, 07:24:37 PM
 #4

A really great writeup and definetly true. Governments (well, not only govs, everybody) fear the loss of control. Idealism would be a soultion but in the current cynical days of political movements, this will be hard.
Idealism was always what brought the society on the next level, both in good ways and in bad ways, but generally you can say, that progressive movements (for equality and more freedom(for the 'small guy', not companys inherently)) are normally in advantage for society.
Let's hope, atleast for once, that, instead of a system, that only tries to gain power and survive, we get a good government, idealistic driven, which tries to do it for the people and a greater good, a government that will immigrate and bid it's, the own powers threatening, advancement welcome, instead of fighting it (Bitcoin)

Thanks for the writeup David

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October 03, 2014, 09:58:11 PM
 #5

Very good write-up David.  Enjoyed reading it. 
Seems like the community is doing a fine job "dividing" on its own, making easier for the banksters/governments to do the "conquering" part.

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October 03, 2014, 10:21:23 PM
 #6

Super article
Bravo

it ain't much but it's honest work
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October 03, 2014, 10:22:33 PM
 #7

Intersting read, and I agree with the whole "bitcoin resting on it's laurels" thing.

RE: crypto-fiat:

Isn't the market capital that you can safely store/transact in a blockchain only proportional to the power (difficulty) of the overall network?

How would a crypto-fiat survive? If any serious capital existed in it then it would make financial (if not ethical) sense to brute force hack the blockchain.

We all know fiat scheme operators like to run their games with minimal overheads, I can't see them investing in or evolving the network hardware too much.

Even if you couldn't extract any capital out of the system (due to traceability issues) it would still be a target for a competing government on the global stage.

I think a premined coin can never hold alot of capital for this reason.

But having said that: I can see SHA256 miners getting lured onto a fractional reserve blockchain for "perks". And agree with your general sentiment.
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October 03, 2014, 10:33:02 PM
 #8

Excelente analysis.

Second, it is easier to win if your competitor lets you win. Build your opponent a golden bridge to retreat across. If a governement can take advantage of crypto (and I already explained it can), make it so that this is a mutually-profitable agreement. Hatred does not go far; negociation goes much farther. Hey, I'm French, I know what I am talking about, we have an A-grade in Stubborness and Stupidity (Africa, Indochina...) whereas the British were much smarter.
Governement wants money and control. Let him do it whilst allowing anyone on an individual basis to opt-out. If we create the tool, it will be possible. If we let the government create it, much less.

What concrete actions must be done in your opinion about this second point?



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October 03, 2014, 10:38:38 PM
 #9

I dont get why gov would like to create own cryptocurrency. I mean if we agree cryptocurrency = decentralized currency with public ledger nobody is granted to control.
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October 03, 2014, 11:04:19 PM
 #10

I like the term cryptofiat.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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October 03, 2014, 11:39:53 PM
 #11

Intersting read, and I agree with the whole "bitcoin resting on it's laurels" thing.

RE: crypto-fiat:

Isn't the market capital that you can safely store/transact in a blockchain only proportional to the power (difficulty) of the overall network?

How would a crypto-fiat survive? If any serious capital existed in it then it would make financial (if not ethical) sense to brute force hack the blockchain.

We all know fiat scheme operators like to run their games with minimal overheads, I can't see them investing in or evolving the network hardware too much.

Even if you couldn't extract any capital out of the system (due to traceability issues) it would still be a target for a competing government on the global stage.

I think a premined coin can never hold alot of capital for this reason.

But having said that: I can see SHA256 miners getting lured onto a fractional reserve blockchain for "perks". And agree with your general sentiment.

Brute force a centrally checkpointed blockchain isn't all that effective, especially when checkpoint servers can automatically update the checkpoints.  At least from my own understanding, could be wrong of course.

David, awesome write up. It is refreshing to take a step back from the daily grind of the mechanics of the cryptocurrency community, and put this all in realistic terms.

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October 04, 2014, 12:05:13 AM
 #12

I've been saying that state issued PoS coins are a good option for governments. I don't think premined PoW coins are ever a good idea. They (PoS) offer everything a centrally planned state needs. There can never be fair exchanges between them because of politics so instead people will use Bitcoin as a currency basket to exchange on decentralized markets.

Any significantly advanced cryptocurrency is indistinguishable from Ponzi Tulips.
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October 04, 2014, 12:11:49 AM
 #13

Remarkably powerful speech you gave there. I couldn't have said it better myself - I have said this for many years that to continue to survive in this ever-changing world is to evolve to embrace your fellow human. United we stand.

It's all well that we have created bitcoin and altcoins; both of which have a powerful markup against fiat currency, however what's to stop a bank, or the government or even one of the super-rich to buy a shitload of everything and start to manipulate, rise, fall, or even kill the entire market. We forget that if bitcoin or whatevercoin were to render fiat currency useless, the people in charge would have had a lot of notice from their sector advisors and would already have invested x amount of coin as a contingency plan. There would be no shift of power. None whatsoever.

Like you said, working together to achieve common goals is the best way to move forward. And, of course, nothing like a bit of Darwinian evolution amongst the coin Devs to keep competition tough and on top of their game!

 

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October 04, 2014, 12:29:24 AM
 #14

What do you propose?

Bitcoin is sovereign. Are you?
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October 04, 2014, 12:30:26 AM
 #15

Time to get out of Bitcoin and invest all my money into Reynolds Wrap.
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October 04, 2014, 01:19:55 AM
Last edit: October 04, 2014, 02:05:24 AM by David Latapie
 #16

Hi,

First, thank you all for your insightful remarks. This really makes my day.

Isn't the market capital that you can safely store/transact in a blockchain only proportional to the power (difficulty) of the overall network?
Can't answer, I don't really understand. Could you reformulate, please?

How would a crypto-fiat survive? If any serious capital existed in it then it would make financial (if not ethical) sense to brute force hack the blockchain.
First, big money can recruit the crème de la crème for the technical part.
If I understood correctly, a large part of Bitcoin protection comes from its peta-hash network. I assume crypto-fiat would have a several order of magnitude higher network, exa-hash or even zetta-hash. Or, since we are talking 100% premine, take the PoS route that I know well with HyperStake (shameless plug here). Mega holders (central banks), major holders (top 500) as well as the long trail of small-time taxpayers would secure the network by stacking.
Speaking of PoS, government would like so much inflation to come back... Cryptofiat with 3% inflation, they'd like it (just joking on this part, I don't know if PoS inflation can be compared with real-life inflation - if presstab comes by, he could give his opinion). In any case, major network security here. Won't protect against exploit, but will make them seriously expensive still.
Finally, still on the PoS idea, there is the whole "protecting the planet" thing. Protection against terrorism is becoming passé. Protecting the planet has (sadly) a bright future. As a famous modern French thinker, Jacques Attali, pointed it, dictature in the name of ecology makes completely sense (not that cryptofiat would necessarily mean dictature, but it would be easier to make "transparent transaction" acceptable for the public opinion if it is "in the name of Mother Earth").

Crème de la crème and bazillion-hash network are just two parts of it. The other part I see it that network WILL be attacked. Cyberwarfare, mon ami.

We all know fiat scheme operators like to run their games with minimal overheads, I can't see them investing in or evolving the network hardware too much.
https://en.bitcoin.it/wiki/Myths#Bitcoin_mining_is_a_waste_of_energy_and_harmful_for_ecology "No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc."
Should apply for more than energy. Plus, the price of computing hardware decreases very fast (an avatar of the Moore Conjecture, a.k.a. Moore's Law). If that was not enough, the price of wetware (organic traditional computers, colloquially called "humans") increases - and the price of brick-and-mortar stuff as whole increases too). Plus, biology-based computer hardware (in its infancy for the moment) promises to decrease even faster (see Juan Enriquez at 6m). Meanwhile, human will still cost as much (or even more, as more and more countries will have crossed the Lewis turning point where employees demand more social right and salaries). I for one, welcome our parabiologic overlords.

Even if you couldn't extract any capital out of the system (due to traceability issues) it would still be a target for a competing government on the global stage.
Yep. More fun for competing countries terrorist organisations.

I think a premined coin can never hold alot of capital for this reason.
Test drive with companies already started (I discussed some ideas for making Monero part of this game too, I expect the future crowdfunding platform to make it a reality). We'll see how it scales, especially considering that some companies, like Disney[/email] or [url=https://plus.google.com/explore/citizensamsung]Samsung are not that different from countries.. Prepare popcorn.

I dont get why gov would like to create own cryptocurrency. I mean if we agree cryptocurrency = decentralized currency with public ledger nobody is granted to control.
You assume too much Smiley Ripple, Stellar, MaidSafe... started as centralised. Now, the issuer cannot control what you are doing with the token once it gives it to you (but he can know what you are doing with it, because transparent blockchain). The same way today a government cannot prevent you from buying a forbidden documentary but can know you did (well, he can freese your bank account and could probably freese your address, especially if freezing could be implemented without hard forking, buy using a "consensus freeze" that 51% peers would follow).

There is one way to prevent such control, it is by using cash (coin, not banknotes). In crypto, cash is ring signature. You know where I'm heading (if  not, check my sig).

Excelente analysis.

Second, it is easier to win if your competitor lets you win. Build your opponent a golden bridge to retreat across. If a governement can take advantage of crypto (and I already explained it can), make it so that this is a mutually-profitable agreement. Hatred does not go far; negociation goes much farther. Hey, I'm French, I know what I am talking about, we have an A-grade in Stubborness and Stupidity (Africa, Indochina...) whereas the British were much smarter.
Governement wants money and control. Let him do it whilst allowing anyone on an individual basis to opt-out. If we create the tool, it will be possible. If we let the government create it, much less.

What concrete actions must be done in your opinion about this second point?
You will pardon me to speak about what I know the best: Monero.

First the code. Monero is transparent by default, optionally anonymous and can whitelist inquisitive institutions if you want to (viewkey). This means that you are in control and can exercice you control as much as you want: absolutely for private transactions (this "special package" you really don't want people to know about), moderately for ordinary transactions (buying your daily coffee at Starbucks), lowly for public transaction (a charity receiving a donation, a public company or a governement).
Everyday transaction: mixin count 0
Private transaction: mixin count 2+
Public transactions: viewkey either to everyone (on the website, like we do for Monero), or to specially appointed people (justice, FinSen/SEC...)

Second the initiative. The Monero Economy Workgroup exemplifies the title of this essay: United we stand. To increase adoption, to be better able to speak to institutions, we must unite. So-called "investors" are not enough. We need actors, people willing to actually do something with the technology they have. The best tools is of no use if you don't use.

There is a word for this: empowerment.

To answer your question more directly, Manu92: what concrete actions must be done.
- promote optionally anonymous cryptos (I believe mandatory anonymity is not much better than mandatory transparency)
- do not just buy; also promote, propose, throw yourself into (in French, to invest and to throw yourself into are very similar which leads to confusion: "investir" and "s'investir" are different things)
- always remember the big picture, what is truly at stake

Sincerely,

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October 04, 2014, 01:38:15 AM
 #17


Isn't the market capital that you can safely store/transact in a blockchain only proportional to the power (difficulty) of the overall network?
Can't answer, I don't really understand. Could you reformulate, please?

Many thanks for your extensive reply!

With my question above, I was alluding to the fact that a blockchain with higher difficulty is more secure, the lock on the safe is harder to pick.

You raise interesting points, especially regarding network setup/maintenance costs and the deep pockets of some groups. Although I still think it would be cheaper to hijack SHA256 miners if a big player wanted a POW system (loyalty dissolves quickly behind closed doors) miners will work for peanuts compared to establishing a centralised body. And also a widely spatially distributed network is far superior to attack resilience.

My prediction is that we will see a fractional reserve system atop POW crypto before fiat. Miners initially sharing the spoils of the debt repayments (and transaction fees).

But for sure, us "hobbyists" must prepare for larger moves in the game, whatever form they take. To think otherwise is naive.

edit:
a truly anonymous blockchain will never be allowed to flourish.
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October 04, 2014, 01:46:36 AM
 #18

Nice write up dude.  This cryptofiat term is pretty nifty
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October 04, 2014, 02:00:34 AM
 #19

Cryptofiat would be a double edged sword. One of bitcoin's biggest challenge is bridging between fiat and currencies. If a government were to adopt cryptofiat they would also be establishing a convenient means to leave their fiat for something else.
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October 04, 2014, 03:20:29 AM
Last edit: October 04, 2014, 03:33:19 AM by David Latapie
 #20

With my question above, I was alluding to the fact that a blockchain with higher difficulty is more secure, the lock on the safe is harder to pick.
Understood. This is what we are doing with HyperStake. It has the highest difficulty of any PoS, by order of magnitudes. Some specific code (read here if interested), just reputable people, good code, good karma, good promotion and no bullshit like "we'll replace BTC". What I mean is: if you have all the population of a country securing the blockchain, you can be pretty sure it will be secure (out of exploit, of course).

You raise interesting points, especially regarding network setup/maintenance costs and the deep pockets of some groups. Although I still think it would be cheaper to hijack SHA256 miners if a big player wanted a POW system (loyalty dissolves quickly behind closed doors) miners will work for peanuts compared to establishing a centralised body. And also a widely spatially distributed network is far superior to attack resilience.
I believe corruption scales worse than a full-fledged on-purpose solution. In other words: hijacking SHA256 is good but there a better solutions, especially if you are thinking long-term.

My prediction is that we will see a fractional reserve system atop POW crypto before fiat. Miners initially sharing the spoils of the debt repayments (and transaction fees).
An interesting article about fractional reserve in crypto and why it is a dangerous road to take but could be coming.. And bitcoin.it wiki article on it (did not read, probably interesting, but lazy).

edit:
a truly anonymous blockchain will never be allowed to flourish.
Keyword is allowed Smiley

If a government were to adopt cryptofiat they would also be establishing a convenient means to leave their fiat for something else.
Cryptofiat Law, January 1, 2017. "The only cryptocurrency that can be bought with euros/dollars is CryptoEuro (EUR)/CryptoDollar (USD). Violators will be prosecuted. Natural persons of age 18 or more will be fined of 1260 $/€. Natural persons of less than 18 will have their parents or tutor pay the fine. Officials will be fined 1520 $/€ and businesses will be fined 25,200 $/€." (pure fiction, of course)

"A piece of paper is stronger than any technology" - Agent from the DRCI (France counter-espionage agency)

Voilà!

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