Gold collapsing. Bitcoin UP.

Discussion in 'Economics and Policy' started by cypherdoc, Aug 28, 2015.

  1. Justus Ranvier

    Justus Ranvier
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    If miner revenue only comes sources that are not tied to block height (transaction fees on transactions which can be mined any any block), then the minimum resistance to double spending in Bitcoin is zero.

    If there is revenue tied to block height, then the minimum resistance is greater than zero.

    That might become an issue in 10 or 20 years, and if it does then we know ahead of time what the rough outline of a solution looks like: some kind of transaction or assurance contract that allows the users at that time to buy security in a way that reproduces the effects of today's block reward.
     
  2. Cconvert2G36

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    Good to hear Peter. At the very least you will come back with a perspective I would appreciate hearing about.
     
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  3. molecular

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    here's a hypothesis: maybe they never bought any substantial amount of bitcoins. I know it sounds quite unlikely, but wouldn't that explain some of the behavior we (or at least I) don't quite understand?
     
  4. solex

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    I think that's a contributing factor.
    FWIW here's some unproven gossip and anecdotes I recall reading here and there.

    Adam learned about Bitcoin early but didn't buy until it was in the $120s
    Greg also learned early on but did not think it could work. Maybe he did not buy many coins at first but was looking to acquire 5000 a while ago. Whether he got them who knows.
    So yes, there must be a "missed boat" feeling which being on the ground in BS helps soothe that pain.
    Surely, Luke is loaded, except he won't buy any half-decent broadband.

    Jeff Garzik is meant to have about 350 coins, which is not massive for another early adopter, but at least he is independent and wants main-chain scaling.
     
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  5. solex

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    The probability of some scenarios must vary a lot, and the likelihood of one miner remaining is surely just theoretical. I'm more concerned in the short-term by the weakening of support in Bitcoin dev for SPV clients and the tolerance for concepts like RBF scorched earth.
     
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  6. awemany

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    Peter, congrats to getting your paper accepted. I am eagerly awaiting a report on how things went from that conference :)

    And even though there isn't any discussion planned, there must be some going on on the sidelines (with the beer cup hats).
     
  7. cypherdoc

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    This little break out is turning the 200 DMA back up again. That's a signal.
     
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  8. Peter R

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    Thank you for the notes of support everyone! It is very much appreciated. The program committee yesterday offered me a $1,000 travel bursary and to directly book my flights and hotel, which was nice given how last-minute everything became. [I still don't know how long I have to speak though.]
     
    #228 Peter R, Sep 5, 2015
    Last edited: Sep 5, 2015
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  9. Peter R

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    I think that is a clever idea to ask what guarantees Bitcoin delivers with only a single miner. So we retain double-spend protection provided inflation is non-zero but we lose censorship resistance?

    Do you believe we also lose double-spend protection (hash rate falls to zero) if the inflation rate is zero and there are several miners? I know Greg does, I believe Smooth does as well, and the results of my fee market paper hint at it too (but I'm not convinced).

    I think with the right mathematical model we could show convincingly whether or not this is the case...
     
    #229 Peter R, Sep 5, 2015
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  10. cypherdoc

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    That's a hypothesis I've brought up here many times and I think is quite plausible.

    Adam admitted he didn't get into Bitcoin until mid 2013 (I'm still astonished that was 2.5y after I did). There's a high possibility he is way under water with his coin investment, if he made one during the run up.

    Gmax has always been the Bitcoin Bear since he joined in mid 2011 after i did. I've enumerated ad nauseum why i think this based on my numerous interactions with him over the years. Any coins he has are probably a result of the complimentary hardware given to him a result of his beggings around as mod of the hardware forum.

    Luke undoubtedly has a stash from Eligius.

    Peter Todd we know sold out a while ago.

    So yeah.
     
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  11. cypherdoc

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    Terminator slush says, "I'll be back".

     
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  12. Justus Ranvier

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    For the record, I do not believe the arguments that free competitive in an open market leads to monopolies. Every single time I've seen supposed examples of this happening put forward they always fall apart under scrutiny. So until once is conclusively demonstrated, my position is that mining obeys the same economic principles as any other service in the economy.

    However, for the sake of argument from now on, I'm going to accept that it is inevitable and see what happens anyway. If it turns out that Bitcoin is still useful even with a 100% monopoly on mining, then any degree of decentralization at all is just icing on the cake.

    In Meni Rosenfeld's paper from 2012, he describes the situation of a majority hashpower attacker as "all bets are off". Maybe it's actually worth looking at it in more detail to see if it's a monster under the bed or just a kitten.

    We retain double spend protection provided there exists revenue which the miner can only claim by continually extending the blockchain.

    I think blacklist-based censorship will always be something that improved privacy techniques can render ineffective.

    Whitelisting, however, is the nuclear option from a censor's perspective that probably can't be bypassed without the users exercising their own nuclear option of abandoning the currency entirely.

    I'm not sure, but I can explain in more detail why I think it's the case in a single miner.

    Assume an initial condition of a non-zero difficulty, one miner, no block reward, no block size limit, and enough revenue from transaction fees to make mining profitable.

    In the course of an hour, the miner will receive enough revenue to pay for 6 blocks worth of proof of work.

    However, with transaction fees (as they are currently implemented), there's absolutely no requirement that those six blocks actually extend the chain.

    In order to collect that revenue he only needs to extend the chain by one block. He could choose to orphan the other five if he wanted to without immediately impacting his revenue, which means he could profitably engage in double spend attacks.

    Of course, he can't do this for very long because his costs are measured in purchasing power terms and this kind of behaviour would reduce the purchasing power of his Bitcoin-denominated revenue (as users abandon his chain for a better-behaving currency), but let's just consider the short term impact.

    If any fraction of his revenue can only be obtained by continually extending the block chain, then this represents the minimum profitable double spend. Any transactions below that value (times the number of confirmations) can be considered safe because it will not be profitable for the miner to double spend.

    Right now, the block reward is the only form of revenue that can requires the chain to be continually extended to obtain, but there could easily exist other forms. New opcodes that allow users to create transaction fees that can only be claimed at a particular block height would achieve the same thing.
     
  13. yrral86

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    It sounds to me like you just made an argument for retaining a block size limit at some level. Your conclusions are correct in the case of no limit, but if there is a limit the miner must continue to progress the chain in order to have space for all of the transactions in order to reap the fees.

    Unless someone can convince me my logic is flawed, infinite blocksize just lost one (mostly insignificant) supporter.
     
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  14. Peter R

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    "It sounds to me like you just made an argument for retaining a block size limit at some level."

    The fee market exists and will exist for the foreseeable future because the block reward decays only very slowly.

    No one has even rigorously shown what happens when the block reward goes away. So it is premature to speculate. In my opinion, potential issues we might (or might not) have to deal with 25 - 50 years from now have nothing to due with increasing the block size limit today.
     
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  15. catlasshrugged

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    This is really quite excellent. I look forward to reading the whole of your paper. Also, I saw mentions in this thread of a presentation; please make sure it is recorded and uploaded, if you can. This vein of investigation is in dire need of pursuit and propagation.
     
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  16. yrral86

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    I agree we should raise it. But we should be careful about eleminating it entirely if there is any truth to the progression incentive issue.
     
  17. yrral86

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    Thinking more on this, it is self-evident to me that there is an issue in the case of a single miner. But as long as the network is sufficiently decentralized, competition for the available transactions should proprely incentize progression. That said, it is kind of disturbing that your reaction was "In my opinion, potential issues we might (or might not) have to deal with 25 - 50 years from now have nothing to due withincreasing the block size limit today." I know you have a horse in the race and have been polarized by all of the BS flying around, but ignoring the long term is a dangerous way to go about things.
     
  18. Erdogan

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    It is interesting to speculate about it, but as long as mining is a free market, no government intervention, a single miner is impossible. The crucial thing is to keep the governments out.

    Well, government intervention is also not possible, unless we have a NWO style, all intrusive world government. (And that would also mean a government monopoly...)
     
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  19. Justus Ranvier

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    We have double spending resistance as long as there exists miner revenue that can only be obtained by continually extending the blockchain.

    This situation will definitely exist for about another century in Bitcoin, and the time scale in which the effect might drop to levels at which become a problem is measured in decades as long as Bitcoin adoption continues.

    It absolutely makes sense to worry more about removing roadblocks to continuing Bitcoin adoption in the present. Neglecting today's problem in order to worry about tomorrow's problem might result in tomorrow never arriving.
     
  20. Justus Ranvier

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    Here's a great case study in why the words "centralized" and "decentralized" have moved beyond the category of "useless" to the category of "actively harmful":

    https://www.reddit.com/r/Bitcoin/comments/3jpc44/what_the_fuck_everyone_seriously_as_an_early/

    We can thank everybody who pushed the "decentralization is good" meme without ever explaining what decentralization actually means or how and why it achieves beneficial results for this wonderful display of logic.