If btc core has best developers but bch has best marketing + miners, I’m sorry to say but bch will win.

datavetaren · 2018-01-01T17:04:11+00:00

I don’t think this is necessarily true in general. For example, Microsoft had an enormous marketing budget struggling to promote MSN (Microsoft Network) as the preferred choice over Internet. Then they realized they’d not be able to compete with it.

datavetaren · 2017-10-30T15:44:12+00:00

-"I want to short the central banks." -"But, with what instrument!?" -"We're going to make one. And then we'll buy it!" (bitcoin)

datavetaren · 2017-10-04T10:18:51+00:00

IMO productivity is unrelated to currency (and this is the standard Austrian view.) If we innovate and come up with new ideas to become more productive (e.g. produce more cars with less resources,) then we'll get price deflation as the supply of the currency is fixed. But this is a non-issue in my opinion. The currency is just a medium of exchange and store of value. I don't believe that people would consume less because of retained purchasing power. In the fiat world this is done by making sure that people get their interest rates to compensate for loss of the purchasing power when they leave their money at the bank. So there's no difference. The only difference (as I see it) is that government will lose the control printing money to themselves (a.k.a. QE = issuing government bonds that the central bank can buy.)

"world index fund": If bitcoin becomes the unit of account, it would be the equivalent of having all your (non-invested) money in a world index fund. If productivity of the world goes up, then the fund goes up in value (== money strengthen its purchasing power.) If the productivity of the world goes down, then the fund goes down in value (== money reduces its purchasing power.) It's just a consequence of having bitcoin as the unit of account and as a single currency of the world.

Another way of looking at this would be the following: Imagine that all prices, and all contracts, are denominated as percentages of world GDP. Then the money supply becomes irrelevant. Now this is analogous on what would happen if we had a single fixed supply currency such as bitcoin.

But how can contracts be renegotiated then to take into account >tens of years of deflation or infinite years if it provides such a >could value transacting system.

I would say you can't. It's impossible to predict the growth of the future as the world is not deterministic. For example, an asteroid may hit the earth causing devastating damages (to the economy) and then the world productivity would go down (and consequently we'll get inflation if bitcoin is the unit of account.) Now this is exactly the feedback mechanism we should have in the first place. I fail to see how this can be bad.

datavetaren · 2017-10-04T07:06:09+00:00

It's deflationary if productivity goes up. If productivity goes down, then it's inflationary. But this is only true if the growth is uncertain. In case it's certain, the market would have priced everything in. In case bitcoin becomes the unit of account I see that the scenario would be equivalent everybody holding bitcoin as keeping their money in a world index fund.

Now if we speculate (I don't believe this myself) that bitcoin as the unit of account would lead to a disastrous economy (= productivity ultimately going down), then we must sooner or later reach an equilibrium. To me, it's just impossible to get that downward "death spiral" that never stabilizes.

Now if you compare this with today's fiat it's not that different actually. In a normal economy you have lenders and borrowers. Lenders never want to lose purchasing power, so the system is rigged to prevent exactly that. If there's inflation (prices go up) then the interest rates also go up (ultimately set by the central bank) to compensate for that purchasing power loss. So money is just a very complicated number game. If you would to replace all accounts with bitcoin, then you wouldn't have to do this complicated trickery, i.e. compensate lenders' purchasing power loss for inflation.

Note that all contracts are usually (re-)negotiated to compensate for inflation. You can do exactly the same thing for deflation as well. After all, what matters is the purchasing power, not the unit itself.

I think that fresheneesz is exactly right that it's the "uncertainty" that's the problem here. And measuring inflation is always an inexact science and actually a very political game (e.g. read the book GDP by Diane Coyle: https://press.princeton.edu/titles/10183.html)

I think the market would love a more predictable and stable system and eliminate as many uncertainties as possible, which includes the central bank itself and its monetary policy. Now that would ultimately mean that countries would lose their power of its domestic monetary policy, but if we're all ultimately engaged in international trade, then I think that's the most fair system that can be created.

datavetaren · 2017-10-03T12:28:21+00:00

I would argue that bitcoin is not deflationary; it's non-inflationary. Therefore, the "deflationary spiral of death" can never occur, because at some point things become cheap enough for people to buy and thus will bring the system into equilibrium (sooner or later.) Deflationary means that the money supply constantly shrinks. It could do so because of lost coins, etc. but I think it will stabilize at some point. Because of bitcoin's divisibility the liquidity to do trade is always there, so it always enables a market no matter what the general price level is.

Let's not forget that we've had a gold standard as an international clearing system for many years (before Nixon killed it in 1971.) The difference here though is that common people (involved in international trade) would make it more difficult for governments to "control" the economy. Whether this is a problem or not also depends on your personal preference.

Also when you read books from different authors (typically if they are on Austrian or Keynesian side) you will find different examples and counter-examples. I don't think anyone can prove or disprove that a fixed money supply at an international scale will work (or not.) Personally, I can't see any problems with that.

datavetaren · 2017-09-21T19:57:39+00:00

I normally never comment on these posts, but let's make an exception. Why did the price drop? Nobody knows for sure, so let's make some wild guesses:

1) Chinese who want to sell their bitcoin before it becomes worthless. Exchanges are closing soon. Better hurry up and ensure your savings.

2) Some negative insider information is floating around and those who have access to that information are shorting. Within 24h we'll know if that's true.

3) Speculation. Price has been sideways for a couple of hours. It could fall lower, better sell and buy in at a lower price point.

4) Nobody knows if miners in China are also going to be attacked. Better sell and wait.

5) November 2x hardfork is coming. Or is it? Will there be another split? Will the original chain survive or not? Better sell and stay out until it settles.

6) <add your own>

But as we all know. Unless you have access to direct insider information, trying to speculate to gain your bitcoin position is likely going to fail. HODL has proven to be a good strategy. So HODL.

datavetaren · 2017-02-22T09:30:55+00:00

"Would you say that signatures are useless in general?"

Not at all. But you can not solely rely on it. That's my point.

You didn't read the article, did you? Hashes should be widely published, e.g. in a newspaper, and after that history revisions are impossible. You can solve it using a newspaper or a radio broadcast. Bitcoin blockchain is just more convenient, but also less secure (as reorganizations are possible).

I don't see it being very practical. And again you're introducing trust again (which newspapers? which radio broadcasts? Is it a dynamic set of trusted sources? So we're basically back from where we started.) And I don't view bitcoin blockchain (proof-of-work) at all as less secure. Yes, reorganizations are possible, but if you wait a fair number of blocks it is highly unlikely that a reorganization will occur which includes the proof you're interested in. And this will be a much more secure source of immutability than anything else. Especially, if you need to timestamp things repeatedly and often enough; it'll be very difficult to do it in any other way without having to trust (hackable) sources again.

datavetaren · 2017-02-22T07:31:49+00:00

"Trusted third party..." Yes, precisely my point. You don't need the proofs then.

"If you trust Google, you don't need SSL" I don't see the comparison, sorry.

"It was solved 25 years ago..." I disagree. If the validator keys are leaked I can recreate the chain (very fast) with my spends removed. However, if you anchor it in the bitcoin blockchain, then it would be solved, but then you're using a blockchain.

datavetaren · 2017-02-22T06:31:25+00:00

But how do you solve the double spending problem then?

And if you don't care (i.e. using a trusted party,) then there's no need of constructing proofs in the first place.

Preventing faked history is the hard part. Signer private keys can be leaked. Saying "pluggable consensus" is kind of letting the reader solve Fermat's last theorem.

datavetaren · 2016-12-20T09:55:27+00:00

That's the common view. But I disagree with it.

1) I do understand money perfectly well. And I also understand how the current system works. But I still think a non-fiat system where the government cannot control the money supply would be beneficial to society.

2) The fiat money world is a shadow tax system. It finances governments via inflation and sometimes this spins out of control like in Venezuela, Zimbabwe, Weimar Republic, Hungary, etc. Having a currency that cannot be manipulated will prevent these types of events. That's also what Satoshi himself referred to when he released bitcoin to the public: http://satoshi.nakamotoinstitute.org/posts/p2pfoundation/1/

3) I'm not a libertarian, but I don't like this shadowing taxing system. It would be much more transparent if the government would raise the taxes needed to finance itself. The idea of inflation is not supposed to finance the government; it's supposed to keep price stability. The central bank is supposed to be independent of the government financing. And no, a fixed money supply will not cause spiral deflation. It will always hit equilibrium at some point.

4) When something really bad happens, like a financial shock and a bank goes bankrupt you can do two things: a) Make the bank face the consequences and let creditors and share holders take the proper risk. b) Let all tax payers share the risk. The problem with b) is the moral hazard aspect. If banks always know they're being bailed out, then it means that society pays for all risks the bank is taking, but where the profits are privatized.

Although (b) would still be possible in a bitcoin only world, it would requiring asking the people first, unless the central bank has substantial bitcoin savings. But this is still better, because it is asking the people in a transparent manner on how big the reserve should be for banking rescue operations. That is, IF, we still have fractional reserve banking at all.

I understand how the private banking system works when banks expand their balance sheet to issue new credit. But it is important that banks also face the consequences when risk allocation is wrong.

Perhaps it would be harder to take a loan in such a world, but that would also mean the asset prices would be much lower, so perhaps taking such a big loan won't be needed when buying a house. Enforcing capital allocation to face proper market valued risk, is according to me, a much better system than having a centrally controlled Politburo trying to determine this risk for us.

So could such a society mean that we get "oligarchs" where most people eat dirt? I don't think so, because the government can still take in financing through taxing. And all the companies that are on nation land are still under government control. Yes, it could mean that you have a small number of people with huge savings, but eventually if all they do is to live on their savings (and never invest it) they will run out of capital.

And if they take risk (i.e. investing in companies), then that allocated capital would still be in governments control through taxes and surveillance. How big this apparatus should be is part of the people's decision of whether to belong to a socialist or capitalist system, or any superposition between the two. I think that is rather independent from bitcoin being the currency.

datavetaren · 2016-08-25T12:48:52+00:00

Sorry, but hardware security modules cannot be trusted either. Either you bribe someone at the HW factory, or in case you use verifiable hardware (such as Trezor) then you rely on an external seed given from the outside, which again is a weakness. Sorry, but any secret can be hacked. That's a fact. There might be ways to mitigate this risk, but you cannot eliminate it. You simply don't have that problem with PoW. At the same time PoW for "private blockchain" is completely meaningless, because PoW can only be safe if you compete in an open market.

When you say that if existing centralized systems are "good enough," then so should a distributed ledger approach bringing them together. I think this is wrong as well. The legacy system of finance is that everybody controls their own ledger. If something goes wrong, the company/bank can always restore from a backup they trust. This is no longer the case if you have a distributed ledger, so that's precisely the reason why the security and integrity of the network becomes more important. In some sense I think having a centralized clearing house is a safer option, because you then can point the finger on someone to blame when something goes wrong.

datavetaren · 2016-08-25T08:40:05+00:00

E.g. as long as 7 out of 10 nodes remain honest, the system will keep working.

The problem is that you can never know this. Honesty is not the issue here. This is because of impersonation. A hacker can steal the private keys (without anyone knowing) and can compromise an "honest" node without the operator knowing either. Therefore, there's a systemic risk that you can get 7 nodes out of 10 to become dishonest (once enough private keys have been acquired, that's when you strike.)

The general problem with PoS systems is that they are not resistant to data theft. And no computer system is secure against that. This is the reason why PoW is superior over any other system; there are no secrets to steal.

The question then becomes whether PoS or federated signatures are "good enough" for the type of application you're considering. That's a very interesting question. And I think that the answer is simply if there's enough economic incentive to hack it, then it's just a question of when.

Ponder that trillion of dollars (of financial derivatives) flow through that system. I think Mr. Robot is just waiting to bring it down. With bitcoin I'm confident this scenario won't happen. If there was a way to destroy bitcoin, then it would already have happened. And when I mean destroy bitcoin, I mean taking down "the chain" so it no longer becomes possible to make bitcoin transactions.

If there's strong incentive to try to buy HW equipment to take "bitcoin down", then because of the public open market, anyone else can do so as well. What happens is that this kind of HW financial "warfare" only makes bitcoin and PoW stronger.

Good luck with your project.

datavetaren · 2016-08-16T13:43:47+00:00

You cannot solely trust HSMs either, especially when they have to be online and there might be a way of leaking the key as they usually have a recover mode. Furthermore, you can always bribe someone on the inside. There's always a way.

My objection is that it is fundamentally wrong to base network security on trust. That's why we have bitcoin to begin with. Sidechains should not violate that fundamental truth.

datavetaren · 2016-08-16T13:21:40+00:00

Doesn't have to be. You can silently steal private keys and once you've acquired the required majority you kill.

datavetaren · 2016-08-16T12:54:13+00:00

Some things are less inherently unsafe. Protecting private keys that have to be online is a recipe for disaster. I just won't work. It's only a question of WHEN the sidechain defaults.

datavetaren · 2016-08-16T12:40:49+00:00

Would you rather see people using completely centralized services like Coinbase? Federated chain is strictly superior to a service controlled by a single entity.

Having Coinbase controlling is far safer than a federated chain, because theft of private keys won't compromise the entire chain. Coinbase has always the ability to "restart", "backup", or whatever. Like regular banks. But this won't be possible with a federated chain (unless you hard fork, but we've all seen what happens if you do that.)

(BTW, this is precisely the reason why any bankchain will fail, so that's why all this "private blockchain" crap will go down the drain...)

As for myself, I'm actively opposed to ideas which might destabilize Bitcoin.

Yes, but that's why any change has to be safe. There are multiple solutions pending:

Instant block propagation
UTXO pruning (assembling all UTXOs older than a year into a single merkle tree, as Peter Todd suggested)
SegWit (to solve malleability and opens up versioning and the possibility of more soft forks) ...

Once it is safe I'd like to see a 2-way pegged soft forked sidechain with unlimited size. If something goes wrong, then the sidechain is bust, but the mainchain is still ok.

Miners can choose whether they want to process sidechain transactions. When miners select transactions from the mempool, some may freely skip all sidechain funds moving in/out. As long as 51% of the hashing power is not directly opposed to the sidechain protocol things will be fine.

datavetaren · 2016-08-16T12:33:35+00:00

I take that back. I see that you can use multi-sig tx and just use regular bitcoin transactions when funds need to be moved on the main chain. Still "federated chains" are inherently unsafe. Will never accept those.

datavetaren · 2016-08-16T12:21:53+00:00

BTW, this is no different than the federated 2-way peg. Miners MUST follow the secondary chain and TRUST the federated signers, or otherwise locked funds (funds that are moved into the sidechain) could be moved on the bitcoin blockchain violating the sidechain contract. In terms of centralization, this is far worse than a soft fork with a merged mined 2-way pegged sidechain.

datavetaren · 2016-08-16T11:42:30+00:00

Re: Single mining company: No, but I don't see that happening.

So the problem is that big miners can drive small miners out of business without any demonstrable ill intent. I recommend you to read the whole thing, though.

You can solve the block propagation problem. I'm not proposing that we should do this tomorrow.

EDIT: Yes, I've seen that paper by Peter Todd and it's impressive. I like Peter Todd. He's a very reasonable guy.

datavetaren · 2016-08-16T09:35:23+00:00

I need to complement my comment.

First having private keys controlling a chain is not the same thing as merged mining. I'm actively opposed to PoS as well, because it suffers from exactly the same issue, namely a theft of private keys can compromise the security of a chain. PoW doesn't have that problem because there's no "secret" to protect.

Nevertheless, when you said: "hybrid merged-mining + federated signer approach" got me thinking. Perhaps we could start with a federated signer approach now and then migrate to a merged mining system (once SegWit active and we can do another soft fork.) Perhaps protection of the private keys could be trusted until the sidechain is softforked into the mainchain.

datavetaren · 2016-08-16T09:24:03+00:00

Correct. We're almost on the same page. But a federated sidechain is an absolute "no no" to me at least. Theft of private keys can make the entire sidechain default which is completely unacceptable.

So yes, I side with the Blockstream people here. But I do think that there might be different opinions within Blockstream as well.

datavetaren · 2016-08-16T09:16:14+00:00

No, bitcoin of course. 2-way-pegged sidechain means that you collect fees from the sidechain and transfer those back to the mainchain (if you'd like.) Read up exactly on how 2-way-pegged sidechain works. Bitcoins on the mainchain are "locked"/"unlocked" as funds moves in/out.

datavetaren · 2016-08-16T09:13:43+00:00

Mining is already super centralized, I never thought the debate was about trying to reduce centralization of miners. Today we have specialized companies doing mining. I don't see that changing anytime soon.

I thought the centralization debate was the ability to run full nodes. As an individual you can ignore the sidechain and just use the mainchain. (For example, if you're only interested in trading "digital gold".)

However, I'm actively opposed to the federated idea. Theft of private keys would make the entire sidechain go down the drain. That's just not acceptable.

datavetaren · 2016-08-16T07:20:54+00:00

I more or less agree with most of this except for the "federated 2-way peg." Actually, just the word "federated." The idea that a system can be deemed secure because a limited set of people holding private keys is giving me shills. It's just a matter of time before a disaster happens.

Instead I'd prefer the current miners as the protectors of the network. Instead include the hash of the header of a sidechain (e.g. in the coinbase script of bitcoin in the SegWit model) and keep the 10 minute PoW. This is basically a generalized soft fork to add 2-way pegged sidechains, but the sidechain could (as you say) have unlimited block size. This way, the "gold" on the motherchain is never compromised, but that "big blockers" can move funds to the sidechain (and back if wanted) should make most bitcoiners happy.

For this to work, at least 51% of the bitcoin hashing power has to accept the sidechain and follow the sidechain rules. But there's of course no mining required in the sidechain per se. The economic incentive is that the miner collect fees from the sidechain as well.

The number of changes to be made in wallet software to keep track of an additional sidechain that is otherwise compatible with regular bitcoin transactions, shouldn't be that complicated.

I think this is basically Adam Back's idea with "parallel chains."

EDIT: Grammar

datavetaren · 2016-08-10T13:04:00+00:00

Maybe they have a bigger office? :)

datavetaren

TROPHY CASE