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Security is always about economy - it is after all about incentives and disincentives. Bitcoin makes this explicite with the mining process and the currency. No

by zby 11y ago

Security is always about economy - it is after all about incentives and disincentives. Bitcoin makes this explicite with the mining process and the currency. Now it seems that some financial companies like the idea of a fully decentralized ledger, system where you don't need to trust a central authority to settle deals. But they don't like the currency part of it. I can understand them - I for one hate the wastefulness of the mining process - but it seems like they believe that they can build a decentralized system without the currency part that supports the economy of incentives and disincentives. Don't they understand the link between those two parts? Or maybe they think that it is enough to build some cargo cult system - that just copies the names, but is not decentralized at all - to lure investors? Update:s/distributed/decentralized/

lifeisstillgood 11y ago
But the implication is that the price of each new bitcoin must be a fraction of the total runtime of computing power on the planet. Let's say all financial transactions now appear on the blockchain, and every ten minutes a new block is mined. And furthermore let's say all the compute power of the world is on grid aka E3. And hiring the whole lot will take a credit card with 1 million dollars per ten minutes To Dr Evil, The value of controlling that chain is immense. And he would be willing to pay half a million dollars to write his adjustments to the chain The 25 bc handed over for that surely has to then be equal to that half million plus a tiny amount, otherwise Dr Evil will be willing to pay for half the worlds compute resources but good actors would not. Can we then assign a rough value to Bc now? And is the distribution of assets fair?
- Already__Taken 11y ago
  If Dr Evil could do that it's not in their interest to because we'd all know how the 25 btc came to exist and the blockchain as a system would be undermined and lose its value. Isn't that the point? The act of defrauding it is what devalues the chain. *Edit: I misunderstood a bit. But to then go on, the value of operating the bitcoin chain with your compute resources is to control and charge transaction fees isn't it? Profit from mining is the initial gold-rush kick to get the system popular. You're not always supposed to make money minting the coin as it were.
  - lifeisstillgood 11y ago
    For each block Dr Evil can add his evil transaction (illegally transfer ownership of an extinct volcano to Evil Corp). If such a transaction is worth more than the cost of renting half the worlds commuters for ten mins then it's worth doing to him As such, we must make sure good actors are more incetivsed to hold 50% of compute power. So the cost of renting the 50% must be 25bc or it must be socialised as the cost of not letting Dr Evil succeed. If it is socialised, we would be insane to write a blank computing cheque for the future So we may well want to have private chains with clear mechanisms for saying what is and is not allowed onto the chain. Blockchain is a bit socialist right now - anyone can add any transaction. I cannot imagine it surviving like that - but then the Internet is not doing too badly against the same forces - the compromise may be progress
olalonde 11y ago
> Or maybe they think that it is enough to build some cargo cult system - that just copies the names, but is not distributed at all - to lure investors? My money is on this (or ignorance). "Private blockchain" is an oxymoron. If you take out "decentralised consensus mechanism" from "blockchain", what is left? They might be working on some innovative database system but without a fully decentralised consensus mechanism (e.g. proof of work, which was the true innovation behind Bitcoin), calling it a blockchain is misleading.
deleted 11y ago
[deleted]
to3m 11y ago
If the consensus itself is the reward, and all interested parties have a stake in the consensus - which would seem sensible, though I admit the article doesn't say - the incentives don't need to work in the same way. (Of course, blockchains are so hot right now, and that can attract all sorts - so who knows what the real motivation is here? But I think dismissing it as a transparent con is premature.)
aakilfernandes 11y ago
You're assuming their using an open POW scheme like Bitcoin's. That may not be true. They could set it up so only the blocks of 5 miners controlled by the banks are "trusted" and only if they each keep under a certain quota. They could go for a round-robin style consensus. They could be doing something completely different.
- wtvanhest 11y ago
  To add a little more to this comment... If you are familiar with how the Blockchain works, there are two short white papers on the topic at BitFury's site: http://bitfury.com/white-papers-research http://bitfury.com/white-papers-research I have consistently written off Bitcoin since I originally read about it on HN in 2011sh. Now that I have taken the time to understand a lot more about the blockchain, I am absolutely convinced that it has a high likelihood of being a really powerful force in technology, finance, data, etc. Disclaimer: I own roughly $2 USD in Bitcoins.
  - aakilfernandes 11y ago
    Its really a shame that the most focused on aspect of blockchain technology became its price. I think thats going to change really soon.
- zby 11y ago
  I think I covered that under the 'cargo cult' part. Bitcoin is a true breakthrough, it does what after CAP theorem seemed impossible, and this is why it is so interesting and popular. They want this popularity - so they use the names that suggest that this is about the same thing - but in fact what they plan has not much in common with a decentralized system.

by zby 11y ago

lifeisstillgood 11y ago

But the implication is that the price of each new bitcoin must be a fraction of the total runtime of computing power on the planet. Let's say all financial transactions now appear on the blockchain, and every ten minutes a new block is mined. And furthermore let's say all the compute power of the world is on grid aka E3. And hiring the whole lot will take a credit card with 1 million dollars per ten minutes To Dr Evil, The value of controlling that chain is immense. And he would be willing to pay half a million dollars to write his adjustments to the chain The 25 bc handed over for that surely has to then be equal to that half million plus a tiny amount, otherwise Dr Evil will be willing to pay for half the worlds compute resources but good actors would not. Can we then assign a rough value to Bc now? And is the distribution of assets fair?

Already__Taken 11y ago
If Dr Evil could do that it's not in their interest to because we'd all know how the 25 btc came to exist and the blockchain as a system would be undermined and lose its value. Isn't that the point? The act of defrauding it is what devalues the chain. *Edit: I misunderstood a bit. But to then go on, the value of operating the bitcoin chain with your compute resources is to control and charge transaction fees isn't it? Profit from mining is the initial gold-rush kick to get the system popular. You're not always supposed to make money minting the coin as it were.
- lifeisstillgood 11y ago
  For each block Dr Evil can add his evil transaction (illegally transfer ownership of an extinct volcano to Evil Corp). If such a transaction is worth more than the cost of renting half the worlds commuters for ten mins then it's worth doing to him As such, we must make sure good actors are more incetivsed to hold 50% of compute power. So the cost of renting the 50% must be 25bc or it must be socialised as the cost of not letting Dr Evil succeed. If it is socialised, we would be insane to write a blank computing cheque for the future So we may well want to have private chains with clear mechanisms for saying what is and is not allowed onto the chain. Blockchain is a bit socialist right now - anyone can add any transaction. I cannot imagine it surviving like that - but then the Internet is not doing too badly against the same forces - the compromise may be progress

olalonde 11y ago

> Or maybe they think that it is enough to build some cargo cult system - that just copies the names, but is not distributed at all - to lure investors? My money is on this (or ignorance). "Private blockchain" is an oxymoron. If you take out "decentralised consensus mechanism" from "blockchain", what is left? They might be working on some innovative database system but without a fully decentralised consensus mechanism (e.g. proof of work, which was the true innovation behind Bitcoin), calling it a blockchain is misleading.

deleted 11y ago

[deleted]

to3m 11y ago

If the consensus itself is the reward, and all interested parties have a stake in the consensus - which would seem sensible, though I admit the article doesn't say - the incentives don't need to work in the same way. (Of course, blockchains are so hot right now, and that can attract all sorts - so who knows what the real motivation is here? But I think dismissing it as a transparent con is premature.)

aakilfernandes 11y ago

You're assuming their using an open POW scheme like Bitcoin's. That may not be true. They could set it up so only the blocks of 5 miners controlled by the banks are "trusted" and only if they each keep under a certain quota. They could go for a round-robin style consensus. They could be doing something completely different.

wtvanhest 11y ago
To add a little more to this comment... If you are familiar with how the Blockchain works, there are two short white papers on the topic at BitFury's site: http://bitfury.com/white-papers-research http://bitfury.com/white-papers-research I have consistently written off Bitcoin since I originally read about it on HN in 2011sh. Now that I have taken the time to understand a lot more about the blockchain, I am absolutely convinced that it has a high likelihood of being a really powerful force in technology, finance, data, etc. Disclaimer: I own roughly $2 USD in Bitcoins.
- aakilfernandes 11y ago
  Its really a shame that the most focused on aspect of blockchain technology became its price. I think thats going to change really soon.
zby 11y ago
I think I covered that under the 'cargo cult' part. Bitcoin is a true breakthrough, it does what after CAP theorem seemed impossible, and this is why it is so interesting and popular. They want this popularity - so they use the names that suggest that this is about the same thing - but in fact what they plan has not much in common with a decentralized system.