Gold collapsing. Bitcoin UP.

tynwald

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Dec 8, 2015
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I reckon the banks are just trying to EEE 'blockchain'
Thats one possibility - but seriously Bitcoin usage is so small and the implementation so inadequate technically speaking that it could not be the basis for any settlement system operating in any of the top 50 or so economies.

Most likely they are studying the concepts to see if anything a) threatens their existing business (NO) or b) could be used for their own internal tech issues(MAYBE). See the report by DTCC @ http://dtcc.com/news/2016/january/25/blockchain-white-paper for a well-written survey of good/bad/ugly points re Bitcoin & settlement of securities.
 
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cypherdoc

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Aug 26, 2015
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@YarkoL

If you really want to learn more about gold and how it relates to Bitcoin, I suggest you to back to this threads progenitor, the Gold: I smell a Trap thread from about August to December 2011 where miscreanity and I heavily debate these topics and when this thread stayed more relatively on topic. Since then it's evolved more into a mega thread /Slack channel, for the better, I think but less on topic that's OK.

Bottom line is that for 5000 years people traded gold for goods on a world wide basis directly and instantaneously as both a settlement and a bearer bond. None of these problems like delayed txs, RBF, preferential fee treatment, varying fees, offchain txs (which btw are actually more representative of debt).
 

YarkoL

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Dec 18, 2015
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Don't forget where you are; this is the Gold collapsing, Bitcoin UP thread where we've discussed just these principles of Sound Money, settlement layers, etc for over 4.5 years now by former big pm holders, such as myself.
That's why I was asking (not taunting or anything). Because obviously you have better grasp on these things than myself. It was an argument I had never seen before, so I wanted some evaluation.
 

theZerg

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Aug 28, 2015
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Bitcoin can't settle unless it is actually worth something. People have to accept it as payment for it to be worth something... ultimately banks must be able to pay off creditors with it. Therefore it must be a payment network before it can be a settlement network.

Large blockers aren't arguing that it shouldn't be a settlement network. We are arguing that it cannot ONLY be a settlement network.
 

sickpig

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Aug 28, 2015
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Would you agree that my conclusions above are correct? That being SW is bad for the long term health of miners and network resources in terms of BW consumed because it encourages bigger block relays up to 4mb composed primarily of multi sig txs that will pay less in fees (1/4) than otherwise would be paid by a simple increase in the block size limit to 4mb filled with regular p2pkh txs that pay 4x the fees compared to the multi sigs?
[proviso: I'm assuming that with BW you meant base block space (block space modulo signature)]

I didn't think about it enough to grasp all the consequences and side effects of SegWit, especially at the economic level. The sad thing is that the same lack of analysis applies to bitcoin core developers.

At first glance I tend to agree with you, that said a lot of things depend on the way SegWit will be implemented.

For instance consider fees computation: since both base data and the signature have to be relayed even when SegWit will be active, why not use the same algorithm used today take into account both base and signs data? As we already know bandwidth is scarcer than storage, and bandwidth grow seems as quick as we want.

I'm not following SegWit development at all and I'm not able to foreseen how the deployed version will be implemented, so I can't answer your question with enough confidence.
 

theZerg

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cypherdoc

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Aug 26, 2015
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ok, listen up you guys.

i need all of you to get up to speed on the math behind SW, and now, given the $55M Blockstream announcement we just got. if you've ever wondered why we haven't gotten any explanations from core dev as to exactly how their calculations and assumptions have been derived is b/c there aren't any. they are intentionally keeping us in the dark about the economic consequences. based on my analysis, as i've alluded to above, SW will be damaging to miners immediate health by shifting fees away from the mainchain and into LN thru these complex multi-sig tx's that preferentially receive not only a discount (in cost/monetary terms) but also by forcing all of us (miners and full nodes) to carry/transmit even greater amounts of data.

to that end, i am sharing 2 pm exchanges i've had with AJTowns where he explains the higher level math and assumptions behind SW. note esp the part where gmax and pwuille had to make an "estimation" that the network can in fact carry 4MB of BW transmission safely (note the hypocrisy with what they've told us over the last year that 1MB only is safe). this has been explained as the edge case maximum block attack using a sigops single tx with essentially no data (no real economic tx) and 4MB of witness. remember, that this would be a 4MB *block* that still has to be transmitted but gets trimmed down to 1MB by discarding the witness data by 75% to allow it to be soft fork compatible with old nodes. my argument to this is that blocks like this up to 4MB can ALSO be created by inserting a preponderance of LN multi sig tx's into a block which will get a mandated/centrally planned "discount", not only in cost ($) but in space (bytes), giving them an advantage over regular tx's inserted into the same blocks. this isn't fair. this forces miners to get paid less and forces us all to transmit, BW-wise, all this extra data btwn 1-4MB in size depending on how many of these LN tx's get inserted into blocks. given that core dev is choking the mainchain blocks at 1MB and creating a fee mkt, this migration is inevitable as ppl are forced to use LN instead. and that's IF LN even makes economic sense.

pls read AJ's correspondence and give me your interpretations:

ajtowns sent 7 days ago

i'm confused by the use of this term by SW. afaik, it means both a discount in terms of how fees/B are calculated AND a discount in terms of how space is allocated to blocksize. is that true?

can you explain the discounts at a high level ? fyi, i'm very familiar with all other aspects and advantages of SW and have watched pwuille's video 3-4x. it's just this cost/space advantage calcs that are confusing.

thx,

cypher





ajtowns sent 7 days ago

i'm confused by the use of this term by SW. afaik, it means both a discount in terms of how fees/B are calculated AND a discount in terms of how space is allocated to blocksize. is that true?

One implies the other -- miners have a limit they can use up, so they'll fill up this limit in order of who pays the most fees. If they can get two transactions that pay 2c each that use the same amount of the limit as one transaction that pays 3c, they'll take the two transactions and the 4c.

can you explain the discounts at a high level ? fyi, i'm very familiar with all other aspects and advantages of SW and have watched pwuille's video 3-4x. it's just this cost/space advantage calcs that are confusing.

It's kind-of a standard multidimensional optimisation problem. Which probably isn't helpful if you don't think multidimensional optimisation problems are a normal thing to think about? :)

So first, "discount" is an accurate way of describing what you get by segregating signature bytes into the witness, but it's not really that great a way of understanding it in the long-term. Probably a better way is to just think of two different sorts of bytes making up a transaction: ones that increase UTXO and have to be delivered across the network; versus ones that just have to be delivered across the network. Obviously the former will always be more expensive than the latter, but whether that should be 4x more expensive or something else is ambiguous; it's like asking how much more expensive a MFLOP of CPU and a GB of hard disk should be compared to just a GB of hard disk. You can pick a number, but similar numbers would also be reasonable, and it might change over time.

If you've got hard limits for both though, it's easy to get a figure. For segwit as a soft-fork, UTXO can't be more than 1MB, and per jtoomim's numbers 4MB in total is fine for bandwidth (which pwuille and gmaxwell and co also seem to have come up with independently, though I'm not sure if that's numbers or just gut feel). In that case if you're buying "a" lots of UTXO and bandwidth, and "b" lots of additional (witness) bandwidth, then you want a < 1MB and a+b < 4MB. If you write that as a+xb < y, then y<=1 from the first inequality, so 4a+4xb<=4. But the only way to then guarantee a+b<4MB is if x>1/4, so the final constraint is a+b/4<=1, so bytes of b are "discounted by 75%". But "really" what's happening is you're just getting a way of comparing fundamentally different costs, and saying that a byte that hits UTXO (and bandwidth) is 4x the cost of a byte than just hits bandwidth and coming up with a single equation to constrain them both.

The single constraint is stronger than the two we had initially, because you can't have a=0.5MB and b=3.5MB -- that would be 0.5+3.5/4 = 1.375 > 1. "stronger" means "worse" here, in some sense.

The benefit that makes that worthwhile is that it means you only have to worry about a single price when sending a transaction -- okay so the price of a kilobyte of UTXO is 13000 satoshi today, that means a kilobyte of witness is 3250 satoshi and my fee is just 13000*(a+b/4). That makes everything easy to work out.

If you had two different prices and their relationship varied, "UTXO is 13000 today, but witness is 5000 satoshi" then it might turn out that to minimise fees you'd want to vary how you structured your transactions -- "okay witness data's cheap, I can use multisig today", "ooops witness data got expensive, I'd better just use p2pkh", which would then make wallet software really complicated. And, of course, prices would actually be varying every block, rather than just every day.

(So, in summary, the answer is no, I probably can't explain it at a high level...)


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  • ajtowns sent 6 days ago

    But the only way to then guarantee a+b<4MB is if **x>1/4**, so the final constraint is a+b/4<=1

    i'm almost there! got everything except for how you arrived at the x>1/4. can you re-jigger your explanation a bit or give me the basic math at how you arrived at that?

    btw, great high level explanation of the knapsack problem!






    ajtowns sent 6 days ago

    So you were happy with "a + xb < 1MB", because that will guarantee "a < 1MB" (if we don't maintain that, it's not a soft-fork). But we also wanted to guaranteed "a + b < 4MB", and we've only got "x" left to play with.

    We can rewrite "a + xb" as "a + b - (1-x)b", so we have "a + b - (1-x)b < 1MB", and rearranging gives "a + b < 1MB + (1-x)b". So we just need to guaranteed "1MB + (1-x)b < 4MB", or "(1-x)b < 3MB". But x is a constant, so this has to be true for any value of b, and the highest value of "b" we can have that satisfies "a+xb < 1MB" is "b=1/x" (when a=0), so we want "(1-x)(1/x) < 3MB", or "1/x-1 < 3" or "1/x < 4" or "x > 1/4".

    (The knapsack problem as far as CS is concerned is really a different problem, that can just be ignored in bitcoin since most transactions are so much smaller than a block; what we've got here is the multi-dimensional knapsack problem, where we don't just concern ourselves with size, but also UTXO bloat or sigops or sighash operations. But using a weighted sum turns it back into the one-dimensional knapsack problem)
 
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cypherdoc

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Aug 26, 2015
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marry the above posts with these i made yesterday and hopefully the SW math & economic consequences become clearer:

take a look at my bolded edits around an alternative reason why the SW discount has been constructed the way it has.

i've been puzzled as to why gmax et al have suddenly become ok with a 4MB block worth of SWSF data + witness when up to just a couple of months ago they were steadfast at 1MB blocksizes as a limiting bandwidth of the network. i think i finally understand. first, look closely at the original SW calculation quote from AJTowns which still applies:

The 4MB consensus limit could only be hit by having a single trivial
transaction using as little base data as possible, then a single huge
4MB witness. So people trying to abuse the system have 4x the blocksize
for 1 block's worth of fees, while people using it as intended only get
1.6x or 2x the blocksize... That seems kinda backwards.

http://lists.linuxfoundation.org/pipermail/bitcoin-dev/2015-December/011869.html


let me try re-writing the above through the thought processes of a gmax by tweaking the same above paragraph. bolded is mine:

The 4MB consensus limit could only be hit approached by having a single trivial
many complex multi-sig LN transactions causing as little base data as possible, then a singlehuge 4MB witness LN subsidy. So people trying to abuse promote the LN system have almost 4x the blocksize for 1 block's worth of fees, while people using it as intended for routine Bitcoin tx'sonly get 1.6x or 2x the blocksize... That seems kinda backwards, if you're interested in promoting the Bitcoin mainchain versus LN.


another interesting dynamic from AJ:

In particular, if you use as many p2pkh transactions as possible, you'd
have 800kB of base data plus 800kB of witness data, and for a block
filled with 2-of-2 multisig p2sh transactions, you'd hit the limit at
670kB of base data and 1.33MB of witness data.


in the above example note that the blocksize increases the more you add multisig p2sh tx's: from 1.6MB (800kB+800kB) to 2MB (670kB+1.33MB). note that the cost incentive structure is to encourage LN thru bigger, more complex LN type multisig p2sh tx's via 2 mechanisms: the hard 1MB block limit which creates the infamous "fee mkt" & this cost discount b/4 that SW tx's receive. also note the progressively less space allowed for regular tx for miners/users (was 800kB but now decreases to 670Kb resulting in a tighter bid for regular tx space and higher tx fees if they don't leave the system outright). this is going in the wrong direction for miners in terms of tx fee totals and for users who want to stick to old tx's in terms of expense. the math is 800+(800/4)=1MB and 670kB+(1.33/4)=1MB.

note that the network will also be forced to pass around larger & larger blocks (1.1 to 4MB) while miners still only get paid for 1MB blocks. this is all b/c LN sigs are much bigger and more complex and get a preferential 75% discount.
 
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tynwald

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Dec 8, 2015
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perhaps the miners need to push back and ask for transactions to be priced as if SW did not discriminate between transaction types or whether data was stored in one part of a block or another.

I do wonder how obvious and crass the conflict of interest for Core developers paid by Blockstream will have to be before Miners revolt.
 

Justus Ranvier

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Aug 28, 2015
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What do you econ pundits think of this theory?
The need for most payments to be credit transactions rather than money transactions is an unavoidable consequence of the inherent limitations of physical money.

The need to collect and dispose of horse shit is an unavoidable consequence of equine transportation.

People who made a living shovelling horse shit off the city streets had to go get new jobs when automobiles replaced horses.

Apparently what they should have done was lobby car manufacturers to make their cars artificially dispense horse shit onto the street to keep the shit-shovelers employed because, "that's how transportation has always worked!"
 

Norway

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Sep 29, 2015
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I think the fact that the latests news about Blockstream getting more funds didn't move the price at all, would tell us something. It shows that people don't think Blockstream is the dream team with the solution to scaling.
 

awemany

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Aug 19, 2015
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Some frogs feel a little bit funny while the water is getting warmer:

EDIT: Also follow the discussion thread further down. Some BSers say that LN supposedly has "awesome onion routing, better than tor". And then remember how Greg even failed to describe a plan to get there yesterday.

I can fully understand Mike Hearn's sentiment. The amount of lies is staggering. What the fuck is going on in this space?!?!
[doublepost=1454516476,1454515627][/doublepost]One thing I expect from Blockstream in case they soon fail with their ongoing plan to capture and/or break Bitcoin:

That they will change the name of the company.
 

cypherdoc

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Aug 26, 2015
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c'mon guys. no feedback on my technical post above from Towns?

this is incredibly important b/c heretofore, everyone likes SW. there has been NO criticism of it either from a technical or economic standpoint. if i'm right, we now have ammunition to spread to the rest of the community as to why SW will be bad for mainchain scaling and miner long term health. this could sway the discussion.

get your heads around the math and give me feedback.
 
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Richy_T

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What do you econ pundits think of this theory?


[doublepost=1454520522,1454519799][/doublepost]
(Quoting AJTowns)
You can pick a number, but similar numbers would also be reasonable, and it might change over time.
So the correct answer is to allow the market (miners) to decide rather than hard-code it in with a huge discount for segwit transactions.
 
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Richy_T

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(Quoting AJTowns)
The benefit that makes that worthwhile is that it means you only have to worry about a single price when sending a transaction
AKA, this is actually quite a complex thing but it's just going to be hand-waved into simplicity (in a way that pushes Core's agenda, just by coincidence)