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Author Topic: Processing power alternatives  (Read 573 times)
Nomad Tom
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July 18, 2012, 07:05:18 AM
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I don't understand why exactly there needs to be so much processing power devoted to trigger new blocks. Technically it could make a random number generator and reliable hosting, but is it necessary? There are limits to the system bitcoins are based on. What if another cryptocurrency were based on something other than (excessive) number-crunching.

Right now currency is based on decisions in banks, large and small, to create debt. The need for cars, houses, business loans, and a range of other things are met on promises that there will be more money in the future. Money today grows in a slow exponential curve as interest on debts multiplies over time. IOUs have gotten us a long way.

Would it make sense to base have a currency that auto-generates based on a the passage of time, but also on something practical? What if there were thousands of users to begin with, could a random number generator decide which addresses got new blocks by a weighted distribution? There would be the problem of multiple unchecked addresses, but the largest reserves would grow at theoretically the same rate as all other currency in existence. With a steady creation of new blocks, a new unit of currency created in an address could be the equivalent of winning a mini-lottery.

If not based on randomness, maybe a peer to peer currency could be based on power (Kilowatts) like utilities trade and measure. Would it make sense for food stored in grain elevators to trigger new currency with implicit food value? Should every new birth equate to a new unit? What if the time spent working were reliably measured? There are other value systems that could act as inputs in currency generation. What alternatives are out there?

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July 18, 2012, 09:56:29 AM
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Would it make sense to base have a currency that auto-generates based on a the passage of time, but also on something practical? What if there were thousands of users to begin with, could a random number generator decide which addresses got new blocks by a weighted distribution? There would be the problem of multiple unchecked addresses, but the largest reserves would grow at theoretically the same rate as all other currency in existence. With a steady creation of new blocks, a new unit of currency created in an address could be the equivalent of winning a mini-lottery.

If not based on randomness, maybe a peer to peer currency could be based on power (Kilowatts) like utilities trade and measure. Would it make sense for food stored in grain elevators to trigger new currency with implicit food value? Should every new birth equate to a new unit? What if the time spent working were reliably measured? There are other value systems that could act as inputs in currency generation. What alternatives are out there?

You're asking some good questions. Here are a few more thoughts:
In a "fractional reserve" type system, who is entitled to the perks of creating new money? And why them? By a series of convoluted steps in today's legacy system, banks basically print (lend) money at no cost (apart from all the self-imposed expenses like lavish inner-city buildings, and high salaries, which allows them to always report zero or negative profits), and the country's laws are extremely helpful to them if any borrower causes problems. Why don't ordinary people have that special right?

Then you might realise that ordinary people sort-of can print their own money, if they run their own company and call their currency "shares" (or they offer special vouchers). But of course shares and suchlike have their own problems -- trust is limited. How do you stop the person in charge from printing too much and causing high inflation?

Bitcoin attempts to solve these problems by indirectly regulating the inflation rate by controlling how hard it is to make the currency. Nobody can "flood the market" with new coins. You might see the processing power as a painful side-effect of controlling inflation, but in terms of resource usage it's nothing compared to all the armoured cars, security cameras and other measures the banks use to make people feel safer with their glorified ID cards (credit cards).

Edit: I suppose I should also comment on the randomness idea. Wouldn't that make everyone equal, regardless of whether or not they really deserved the same amount of freshly minted Bitcoin? So... How can we measure someone's "deserving-ness" or merit? They could just buy bitcoins at the market rate from someone else, but that doesn't answer the question for the person who got the bitcoins first. So I guess the method of regulating inflation also determines who is entitled to more bitcoins. The best combination of effort + skill + knowledge + technology + existing wealth gets you the most coins.
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July 18, 2012, 08:18:20 PM
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The reason Bitcoin requires a huge amount of processing power to create blocks is to force attackers to expend an equally huge amount of processing power to modify existing blocks, and since each block includes a hash of the previous block, it's impossible to modify a historical block without re-creating all the blocks that came after it, which requires even more processing power. If there was no processing power involved, what's stopping an attacker from just changing arbitrary blocks whenever he feels like it, eg, to facilitate a double-spend attack?

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July 18, 2012, 09:23:37 PM
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I don't understand why exactly there needs to be so much processing power devoted to trigger new blocks. Technically it could make a random number generator and reliable hosting, but is it necessary?

Simple answer is yes.  Blocks forms the permanent record of transactions.  They must be hard to produce.  If they can be easily produced then they can be easily forged.  The reason I will accept a BTC from you is because that prior output (someone sent you a BTC or you mine a BTC from nothing) is buried beneath dozens or hundreds of blocks.  The computational power requires to "fake" that is prohibitively expensive.

If blocks were trivial to make it would be trivial to make a chain of blocks showing you never spent your coins and keep doing that and spend the same coins over and over and over millions of times.  Obviously in such a system nobody would value a BTC very highly.  The difficulty in producing blocks isn't "wasted work"  it is what gives Bitcoin a consensus view of who has what coins and how/why.  Without it the coins have no value.

I think you are getting caught up on the "random" portion.  The only reason there is an element of luck is otherwise the miner with the most powerful gear would always solve the block.  Essentially they would be the central bank.  The random element simply creates a scenario where a random miner solves the block (chance being the % of total hashing power they control) and makes the system decentralized.

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If not based on randomness, maybe a peer to peer currency could be based on power (Kilowatts) like utilities trade and measure. Would it make sense for food stored in grain elevators to trigger new currency with implicit food value? Should every new birth equate to a new unit? What if the time spent working were reliably measured? There are other value systems that could act as inputs in currency generation. What alternatives are out there?

None of these can be done in a decentralized and anonymous fashion.  I have 20 trillion bushels of wheat, I will record and take 20 trillion wheat coins.  Anyone want to sell me something using wheat coins.  Feed your family I got 20 trillion coins.

Even if you created a web of trust network to validate how much wheat I own.  To ensure that I don't double spent still requires either a central authority or a proof of work solution like what Bitcoin uses.
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July 18, 2012, 09:38:20 PM
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There are plenty of real problems in bitcoin that need serious work, so stop trying to solve a problem that doesnt exist.

Nomad Tom
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July 19, 2012, 01:50:03 AM
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How do you stop the person in charge from printing too much and causing high inflation?

Bitcoin attempts to solve these problems by indirectly regulating the inflation rate by controlling how hard it is to make the currency.

Controlling how hard it is to make usually creates supply problems. Since bitcoins are divisible, it only creates a perception of undersupply. As demand for more resources and currency grows, there seems to be only a decrease in calculations in the algorithm to counter the automatic deflation of the currency. The threat of making a new block and blockchain from something previous is the limiting factor for the ease of calculations. I still don't understand why the self-regulation needs to be a calculation humbling cloud super-computing.

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If blocks were trivial to make it would be trivial to make a chain of blocks showing you never spent your coins and keep doing that and spend the same coins over and over and over millions of times.  Obviously in such a system nobody would value a BTC very highly.  The difficulty in producing blocks isn't "wasted work"  it is what gives Bitcoin a consensus view of who has what coins and how/why.  Without it the coins have no value.

Thank you for the clear explanation. I didn't think that block chains could be recreated in situations where blocks lack trading. I guess if the next block were discovered, and the couple of blocks after that, and the several after that were discovered by the same person, then in that time a resourceful hoarder could indeed record 'who traded what' according to their best interests. Who controls the past controls the future even over 20 or 30 minutes with the way verification is structured. With high work requirements and demand, it's unlikely the same group/person would get the most recent blocks and corrupt them. A fix would be hard to come by with automatic acceptance of the newest blocks.

I was thinking that with anything like a basis or alternative, the scenario could be averted because blocks would not be awesomely fungible. Maybe having something like a shared recognition of all blocks within the same time period (right after creation) would lessen the chance that corrupted blocks get the sort of system-shock acceptance seems possible.

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Gerald Davis


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July 19, 2012, 01:52:42 AM
 #7

None of that made any sense.  Not being rude but have you read Satoshi whitepaper?  If you haven't it is like proposing an alternative to gasoline vehicles without understanding how internal combustion engines work.
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July 19, 2012, 08:07:50 AM
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Controlling how hard it is to make usually creates supply problems.
Lack of supply in a base currency isn't a problem, in fact, it is a requirement for currency to function. People will only accept something as payment if they want more of it than they currently have. Imagine if you will a planet made entirely of solid gold. On this hypothetical planet, everyone has as much gold as they could ever want and then some, so nobody would have any reason to accept it as payment. Trying to buy something on this planet with gold coins would be like trying to buy something on Earth with a handful of dirt. The excess supply of gold makes it worthless as a form of currency. Currency can only have value when it is scarce.

Since bitcoins are divisible, it only creates a perception of undersupply. As demand for more resources and currency grows, there seems to be only a decrease in calculations in the algorithm to counter the automatic deflation of the currency. The threat of making a new block and blockchain from something previous is the limiting factor for the ease of calculations. I still don't understand why the self-regulation needs to be a calculation humbling cloud super-computing.
The purpose of the cloud supercomputing is not to regulate the money supply, it to secure the network. The money supply isn't actaully "regulated" at all, in the traditional sense of the word. There is simply a fixed money supply which is distributed according to a fixed schedule to the people who contribute their computing power to the network.

I guess if the next block were discovered, and the couple of blocks after that, and the several after that were discovered by the same person, then in that time a resourceful hoarder could indeed record 'who traded what' according to their best interests.
It is true that miners can arbitrarily decide which transactions get included in a block, but there are few things to keep in mind:
1) Miners cannot forge or alter transactions; a transaction must be included exactly as it is, or else not at all.
2) Transactions that do not make it into the next block are still "remembered" by the network, and may be included in a future block. If one miner refuses to process certain transactions, this merely results in the transaction being delayed until a block is found by another miner who does decide to include the transaction.
3) Miners collect transaction fees. It is always in a miner's "best interests" to include all fee-paying transactions no matter what, since including a transaction requires no more work than not including it.

Who controls the past controls the future even over 20 or 30 minutes with the way verification is structured. With high work requirements and demand, it's unlikely the same group/person would get the most recent blocks and corrupt them. A fix would be hard to come by with automatic acceptance of the newest blocks.
The newest blocks are not automatically accepted. For a block to be accepted, it must meet the proof-of-work requirement and must not contain any invalid transactions. Additionally, if two conflicting blockchains are received, the one with which required the most work to produce is accepted, regardless of which one was received first.

I was thinking that with anything like a basis or alternative, the scenario could be averted because blocks would not be awesomely fungible. Maybe having something like a shared recognition of all blocks within the same time period (right after creation) would lessen the chance that corrupted blocks get the sort of system-shock acceptance seems possible.
Blocks are not fungible. Each is unique and impossible to forge. Any kind of "shared recognition" of blocks produced at the same time is impossible since the two blocks will contain different transactions (at the very least, the block reward will be paid to different addresses).

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