Gold collapsing. Bitcoin UP.

[lunar]

This is pretty fascinating stuff.

http://blog.sldx.com/go-fork-yourself-more-bitcoin-transactions/

So some of us are working on ways to scale the transaction rate by fixing the orphan problem. My braids project is one, but there’s also the leader election mechanism of Bitcoin-NG and the subchains idea of Peter R. Rizun. So the “extension block” might not be a block at all. It might be a braid, a subchain, or a round-robin leader, each of which is an entirely new way to publish transactions that can drastically increase the number of transactions Bitcoin can handle, without resorting to off-chain solutions like payment channels and the Lightning Network.

 

[Peter R]

@lunar

Bob McElrath seems like an intelligent and well-rounded guy. His braids / directed acyclic graphs are indeed pretty fascinating. Happy to have more physicists getting involved in Bitcoin!

 

[rocks]

Sure, if you just take that fact as a given and never examine why it came to be true in the first place, then all the rest of the arrangement makes sense.

But how did those distributors and the retailer get into that predicament in the first place?

Credit is cheap (but not free!) for two reasons:

• The money funding the loads was printed (borrowed) into existence.
  
• Savers are desperate to escape the devaluation caused by the prior point, so they make their savings available to fund loans in situations in which they otherwise wouldn't

Once a business starts using credit to fund its operations, the interest becomes a barrier to earning their way into a state of not requiring more loans.

If the temptation of easy credit isn't enough, then the government is more than happy to use tax policy to forcefully shove them into a credit addition.

Basically 95% of the financial/banking industry is an expensive solution to artificial problems created by that industry and their government accomplices.

The concept of cash savings as "wasted idle capital" only exists in an economy chronically punished by inflation. The idea of money that belongs only to its owners such that involved third parties can't collect rent on is it going to horrify a tiny minority of financial parasites, but they'll just have to learn to accept it and get real jobs.

This is confusing bank created credit with supplier credit, these are two completely different things.

Bank created credit is all the things you said, it is false creation of money, artificially lowers borrowing costs, artificially lowers savings return and artificially expands the money supply and inflation. Bank credit is the problem Bitcoin is here to fix.

Supplier credit is none of this though, it is simply a delay in payment (for example pay 90 days after delivery). A supplier is not lending money, it is lending time value of a product. Accounting wise it appears as a loan on the books, but no money was created or exchanged.

My example was a simple one to show how supplier provided credit can make a supply chain more efficient by lowering the working capital costs of downstream participants. This allows downstream participants to operate more lean from a financial perspective and lowers the cost markup they charge.

Suppliers (not banks) will offer this credit (again not a money loan but a delay in payment) because doing so benefits the supplier by lowering the markup charged by other areas of a value chain, which enables the supplier to capture more of the total profit.

If LN was used in these B2B transactions, it not only prevents suppliers from offering credit but reverses the flow of money and forces downstream participants to pre-pay. This in turn would both lower the profit of the supplier while also raising the cost of downstream participants to operate (their working capital would increase and they would have to go to banks to take larger loans). Here both sides would prefer the current supplier credit model to an LN pre-payment model.

My basic point is most industries are very well optimized financially already and there is little room left for improvement by reorganizing finances. To make something like LN work you have to really understand the reasons behind the payment flows, not just say "hey we automated and secured this type of payment" because that usually will not be enough. This is why I don't think LN will ever be a broadly used B2B payment method. I would expect suppliers and purchasers in a Bitcoin world to be scheduling payments the same as they do today...

 

[Peter R]

How's this for a pitch:

Bitcoin Mining is big business. Every day, miners go to work and come home with an additional ~$1.5 million dollars of bitcoins ($0.5 billion / year). As demand for Bitcoin grows and as the price rises, this figure could quickly increase to $15 million or even $150 million, creating a market worth between $5B to $50B per year.

To maximize profit, miners must implement strategic fee policies to drive up demand for next-block service while simultaneously capturing as many high fee paying transaction as possible. At the same time, they must optimize their connectivity with the rest of the network to minimize orphaning risk, as the loss of a single block cuts into their already-slim profit margins.

<INSERT CATCHY NAME> helps miners maximize the return on their mining hardware investment. We provide industry-leading fee policy technology, dynamically tuned to network conditions; and we provide access to the fastest and most efficient connections between the network's global hash power.

And if we do our job well, there's no reason the value added from our intelligent fee-selection policy and optimized block propgation doesn't provide more value than the miners' brute hashing power itself. We estimate that we can capture 1/4 of industry profits, which--at 10% profit margin--results in earnings between $125M and $1.25B per year.

At a P/E ratio of 50 (come on, Blockchain is all the rage ), we anticipate a valuation for our company in the year 2020 between $6B and $60 billion dollars.

Would you invest?

 

[Richy_T]

I wonder if we could create a big-block insurance fund and sell "orphaning insurance" to miners. The cost of the insurance per block would depend on the size of the block (and possibly other variables). We would promise to pay out (for example) 25 BTC for insured blocks that got orphaned. Right now, the premiums for a block over 1 MB in size would be extremely expensive, but eventually--if we see enough mining and non-mining nodes increase their *acceptance* limits--there might come a time when we'd only charge (say) 0.1 BTC for insurance on a 2 MB block.

Miners would probably need some automated way to get real-time quotes and buy instant coverage; perhaps someone could actually make money off this if he understood the orphaning dynamics better than anyone else.

I think you will find that there are a few miners out there willing to attempt a >1mb block for ideological reasons (many p2poolers for example) and it only takes one block...

 

[Zangelbert Bingledack]

Assuming we only need one (or a few) >1MB blocks to get things going, a one-time bounty might be simplest.

 

[Richy_T]

Sure, if you just take that fact as a given and never examine why it came to be true in the first place, then all the rest of the arrangement makes sense.

But how did those distributors and the retailer get into that predicament in the first place?

Credit is cheap (but not free!) for two reasons:

• The money funding the loans was printed (borrowed) into existence.
  
• Savers are desperate to escape the devaluation caused by the prior point, so they make their savings available to fund loans in situations in which they otherwise wouldn't

Once a business starts using credit to fund its operations, the interest becomes a barrier to earning their way into a state of not requiring more loans.

That doesn't really matter though. Credit allows a business to operate without a lot of capital tied up in stock. The money owed is typically to the supplier and not to banks by the way.

The manufacturer needs to carry that debt, of course but it would have to for some while anyway as a retailer is not going to pay for goods before they are produced and since the cost of producing the goods is less than the cost the retailer pays to the manufacturer, the overall debt burden is lessened.

This is also beneficial to both parties as if an item is not selling quickly, the retailer can keep it in stock without tying up capital and the manufacturer isn't faced with a return of a potentially obsolete item.

Note that this is entirely different from consumer credit. It is probably better to consider the retailer as an operating front for the manufacturer than an independent entity in this model.
[doublepost=1453359717][/doublepost]

Assuming we only need one (or a few) >1MB blocks to get things going, a one-time bounty might be simplest.

Could work. How would you consider implementing it?

 

[Zangelbert Bingledack]

Either crowdfunded or someone credible like Roger, Olivier, etc. may just commit to pay for the first >1MB block if it is orphaned.

 

[Justus Ranvier]

This is confusing bank created credit with supplier credit, these are two completely different things.

Bank created credit is all the things you said, it is false creation of money, artificially lowers borrowing costs, artificially lowers savings return and artificially expands the money supply and inflation. Bank credit is the problem Bitcoin is here to fix.

Supplier credit is none of this though, it is simply a delay in payment (for example pay 90 days after delivery). A supplier is not lending money, it is lending time value of a product. Accounting wise it appears as a loan on the books, but no money was created or exchanged.

I agree they are different things, but they are connected.

It would be impossible for the monetary shenanigans created by bank credit to avoid changing the demand patterns for supplier credit. Think about to what degree the relationship between the time value of products and the time value of money has been skewed by all this.

We won't really know what a healthy supply chain looks like until all those shenanigans are purged.

 

[Zarathustra]

If we see a Bitcoin-precipitated transition to a savings economy instead of a credit economy, we're going to see deep changes in how commerce works.

That would be the end of the economy (homo oeconomicus), since the root and foundation of an economy is Debt. People who live beyond Debt and Government don't trade because they don't have to produce surplus to serve their debt. They are self-sufficient and their production does not grow.

https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years

 

[Erdogan]

I wonder if we could create a big-block insurance fund and sell "orphaning insurance" to miners. The cost of the insurance per block would depend on the size of the block (and possibly other variables). We would promise to pay out (for example) 25 BTC for insured blocks that got orphaned. Right now, the premiums for a block over 1 MB in size would be extremely expensive, but eventually--if we see enough mining and non-mining nodes increase their *acceptance* limits--there might come a time when we'd only charge (say) 0.1 BTC for insurance on a 2 MB block.

Miners would probably need some automated way to get real-time quotes and buy instant coverage; perhaps someone could actually make money off this if he understood the orphaning dynamics better than anyone else.

The easy way: Someone (including me) could pool up and offer 25 BTC for any valid block above 1 MB. Just paid directly to the coinbase address. That should take most of the risk away for the miner (and prize money if it succeeds). If orphaned, we could repeat the insurance offer later.

 

[Zarathustra]

@Erdogan: great idea!

 

[Erdogan]

Or.. maybe even simpler: A thread (here or at reddit) where people can pledge to send an amount, maybe in a signed message, to the coinbase address of the first valid big block, orphaned or not. The aggregated amount will be less or higher than the current block reward, it does not matter.

 

[cypherdoc]

Assuming we only need one (or a few) >1MB blocks to get things going, a one-time bounty might be simplest.

That should be entirely unnecessary. Once Classic forks with 75% miners onboard, there should be plenty of non mining nodes in place as well. At that point it will be no different than we have now; half full blocks on average that occasionally spike up to full blocks. We'll just be reset higher at a doubled level.
[doublepost=1453378429][/doublepost]

Or.. maybe even simpler: A thread (here or at reddit) where people can pledge to send an amount, maybe in a signed message, to the coinbase address of the first valid big block, orphaned or not. The aggregated amount will be less or higher than the current block reward, it does not matter.

Although I think a bounty like that won't be necessary, this thread as a symbolic gesture and as an attempt to go down in history as a major factor and movement from The People in The Blocksize War of 2015 , might indeed want to post a bounty to produce the very first >1MB block in history.

we've already made a name for ourselves.

 

[awemany]

Is this a confirmation of my earlier fear?


If true, this is basically (the banks?) doing a 51% attack by proxy.

 

[tynwald]

That business model works as long as their customer pool has a certain minimum credit-worthiness.
<snip>
If we see a Bitcoin-precipitated transition to a savings economy instead of a credit economy, we're going to see deep changes in how commerce works. Much of what we take for granted as almost immutable laws of nature is going to be revealed to be a credit bubble-induced aberration.

It would be closer to the pre-paid energy markets in some developing countries i.e. keep topping up your balance or the power stops. Removing credit from consumers and companies is going to make commerce a bit flaky, to say the least.

 

[Erdogan]

@awemany
Have no fear. There is nothing anti-china in large blocks.

 

[awemany]

@Erdogan: No, but maybe anti-banks.

I am sure they can come up with a sweet deal for the big miners for some tens of millions.

You can really feel now that there's money and paid interests involved on both sides (Bitcoin on our, fiat on the other).

Currently there is fog of war.

There's no indication that the miners are going to do that except for this tweet and someone from a miner (without being in official capacity) apparently discussing this on some Chinese forum.

So maybe this is all simply a propaganda lie by the small blockers.

However, if the miners hypothetically flip-flop and now flopped back to Core, Occam's razor tells me that someone simply must have paid them to do that. And then the question arises: Who?

 

[lunar]

That would be the end of the economy (homo oeconomicus), since the root and foundation of an economy is Debt. People who live beyond Debt and Government don't trade because they don't have to produce surplus to serve their debt.

I'm not sure I agree with this? It seems like the same argument that bitcoin is never going to be spent becasue it's deflationary?
Is debt the foundation of economy? His argument seems that debt was actually the earliest form of trade. I'm not however convinced that this can be true. For debt to exist something had to be there in the first place, value must exist first? I can't owe you a chicken if there isn't one to give you? Perhaps this is the age old chicken and egg problem? Maybe I miss understood?

Either way the bitcoin endgame will cause an inversion with the collapse of the massive fractional reserve debt based economy we've become accustomed to. I don't see how it will remove all debt though? Seems more like it will just increase the suffrage of debt back down to more sustainable 1-1 levels.

This will be a wrecking ball type change, but then again for a closed system world with exponential population growth we are going to have to face this reality sooner or later and live within our means.
(is this the blocksize debate on a macro scale?)

 

[tynwald]

there will still be debt, but it would be more expensive. people and companies can't buy everything from daily/weekly cashflow.