Litecoin vs. Bitcoin: What’s the Difference? Genesis Mining
Litecoin vs. Bitcoin: What’s the Difference? Genesis Mining
Which is better, mining or trading cryptocurrency? - Quora
New Financial Tools for Bitcoin’s Mining Industry by ...
Bitcoin and Gold “Miners Multiple” Points To Drastically ...
Bitcoin and Gold "Miners Multiple" Points To Drastically ...
could mining pools be charged for violating sanctions?
If those running a bitcoin mixer can be charged for violating AML, can a centralized mining pool charged for mining a transaction violating sanctions? Mining pools are relatively large organizations that control what transactions get into the block as they create the block template using the bitcoin protocol. Thus they have 'ownership' of what transactions are processed. They outsource some of the POW hashing to 'ASIC' operators ( that are not responsible for selecting transactions ) large organizations generate allot of revenue and hire multiple people and present a large target for law enforcement vs a random solo miner that mines a block every now then. They are more likely to be compliant with requests to censor transactions to protect their 'reputation/business' This is, why protocols like better-hash needs to be widely adopted because, with better hash the pool is _NOT_ responsible for selecting transactions - all it will do is pool the rewards. Individual miners in the pool can create their own block templates. Thus they are no longer ASIC operators as they need to run a full node to create the block template. I think betterhash will decentralize legal liabilities of the mining pool. Any point of centralization in bitcoin like a custodian mixing service is vulnerable to legal action.
Eth 2.0 vs Polkadot and other musings by a fundamental investor
Spent about two hours on this post and I decided it would help the community if I made it more visible. Comment was made as a response to this
I’m trying to avoid falling into a maximalist mindset over time. This isn’t a 100% ETH question, but I’m trying to stay educated about emerging tech. Can someone help me see the downsides of diversifying into DOTs? I know Polkadot is more centralized, VC backed, and generally against our ethos here. On chain governance might introduce some unknown risks. What else am I missing? I see a bunch of posts about how Ethereum and Polkadot can thrive together, but are they not both L1 competitors?
What else am I missing?
The upsides. Most of the guys responding to you here are full Eth maxis who drank the Parity is bad koolaid. They are married to their investment and basically emotional / tribal in an area where you should have a cool head. Sure, you might get more upvotes on Reddit if you do and say what the crowd wants, but do you want upvotes and fleeting validation or do you want returns on your investment? Do you want to be these guys or do you want to be the shareholder making bank off of those guys? Disclaimer: I'm both an Eth whale and a Dot whale, and have been in crypto for close to a decade now. I originally bought ether sub $10 after researching it for at least a thousand hours. Rode to $1500 and down to $60. Iron hands - my intent has always been to reconsider my Eth position after proof of stake is out. I invested in the 2017 Dot public sale with the plan of flipping profits back to Eth but keeping Dots looks like the right short and long term play now. I am not a trader, I just take a deep tech dive every couple of years and invest in fundamentals. Now as for your concerns:
I know Polkadot is more centralized
The sad truth is that the market doesn't really care about this. At all. There is no real statistic to show at what point a coin is "decentralized" or "too centralized". For example, bitcoin has been completely taken over by Chinese mining farms for about five years now. Last I checked, they control above 85% of the hashing power, they just spread it among different mining pools to make it look decentralized. They have had the ability to fake or block transactions for all this time but it has never been in their best interest to do so: messing with bitcoin in that way would crash its price, therefore their bitcoin holdings, their mining equipment, and their company stock (some of them worth billions) would evaporate. So they won't do it due to economics, but not because they can't. That is the major point I want to get across; originally Bitcoin couldn't be messed with because it was decentralized, but now Bitcoin is centralized but it's still not messed with due to economics. It is basically ChinaCoin at this point, but the market doesn't care, and it still enjoys over 50% of the total crypto market cap. So how does this relate to Polkadot? Well fortunately most chains - Ethereum included - are working towards proof of stake. This is obviously better for the environment, but it also has a massive benefit for token holders. If a hostile party wanted to take over a proof of stake chain they'd have to buy up a massive share of the network. The moment they force through a malicious transaction a proof of stake blockchain has the option to fork them off. It would be messy for a few days, but by the end of the week the hostile party would have a large amount of now worthless tokens, and the proof of stake community would have moved on to a version of the blockchain where the hostile party's tokens have been slashed to zero. So not only does the market not care about centralization (Bitcoin example), but proof of stake makes token holders even safer. That being said, Polkadot's "centralization" is not that far off to Ethereum. The Web3 foundation kept 30% of the Dots while the Ethereum Foundation kept 17%. There are whales in Polkadot but Ethereum has them too - 40% of all genesis Ether went to 100 wallets, and many suspect that the original Ethereum ICO was sybiled to make it look more popular and decentralized than it really was. But you don't really care about that do you? Neither do I. Whales are a fact of life.
VCs are part of the crypto game now. There is no way to get rid of them, and there is no real reason why you should want to get rid of them. They put their capital at risk (same as you and me) and seek returns on their investment (same as you and me). They are both in Polkadot and Ethereum, and have been for years now. I have no issue with them as long as they don't play around with insider information, but that is another topic. To be honest, I would be worried if VCs did not endorse chains I'm researching, but maybe that's because my investing style isn't chasing hype and buying SUSHI style tokens from anonymous (at the time) developers. That's just playing hot potato. But hey, some people are good at that. As to the amount of wallets that participated in the Polkadot ICO: a little known fact is that more individual wallets participated in Polkadot's ICO than Ethereum's, even though Polkadot never marketed their ICO rounds due to regulatory reasons.
generally against our ethos here
Kool aid. Some guy that works(ed?) at Parity (who employs what, 200+ people?) correctly said that Ethereum is losing its tech lead and that offended the Ethereum hivemind. Oh no. So controversial. I'm so personally hurt by that. Some guy that has been working for free on Ethereum basically forever correctly said that Polkadot is taking the blockchain tech crown. Do we A) Reflect on why he said that? or B) Rally the mob to chase him off?
Also Parity locked their funds (and about 500+ other wallets not owned by them) and proposed a solution to recover them. When the community voted no they backed off and did not fork the chain, even if they had the influence to do so. For some reason this subreddit hates them for that, even if Parity did the 100% moral thing to do. Remember, 500+ other teams or people had their funds locked, so Parity was morally bound to try its best to recover them. Its just lame drama to be honest. Nothing to do with ethos, everything to do with emotional tribalism. Now for the missing upsides (I'll also respond to random fragments scattered in the thread):
This isn’t a 100% ETH question, but I’m trying to stay educated about emerging tech.
A good quick intro to Eth's tech vs Polkadot's tech can be found on this thread, especially this reply. That thread is basically mandatory reading if you care about your investment. Eth 2.0's features will not really kick in for end users until about 2023. That means every dapp (except DeFI, where the fees make sense due to returns and is leading the fee market) who built on Eth's layer 1 are dead for three years. Remember the trading card games... Gods Unchained? How many players do you think are going to buy and sell cards when the transaction fee is worth more than the cards? All that development is now practically worthless until it can migrate to its own shard. This story repeats for hundreds of other dapp teams who's projects are now priced out for three years. So now they either have to migrate to a one of the many unpopulated L2 options (which have their own list of problems and risks, but that's another topic) or they look for another platform, preferably one interoperable with Ethereum. Hence Polkadot's massive growth in developer activity. If you check out https://polkaproject.com/ you'll see 205 projects listed at the time of this post. About a week ago they had 202 listed. That means about one team migrated from another tech stack to build on Polkadot every two days, and trust me, many more will come in when parachains are finally activated, and it will be a complete no brainer when Polkadot 2.0 is released. Another huge upside for Polkadot is the Initial Parachain Offerings. Polkadot's version of ICOs. The biggest difference is that you can vote for parachains using your Dots to bind them to the relay chain, and you get some of the parachain's tokens in exchange. After a certain amount of time you get your Dots back. The tokenomics here are impressive: Dots are locked (reduced supply) instead of sold (sell pressure) and you still earn your staking rewards. There's no risk of scammers running away with your Ether and the governance mechanism allows for the community to defund incompetent devs who did not deliver what was promised.
Wouldn’t an ETH shard on Polkadot gain a bunch of scaling benefits that we won’t see natively for a couple years?
Yes. That is correct. Both Edgeware and Moonbeam are EVM compatible. And if the original dapp teams don't migrate their projects someone else will fork them, exactly like SUSHI did to Uniswap, and how Acala is doing to MakerDao.
Although realistically Ethereum has a 5 yr headstart and devs haven't slowed down at all
Just because it's "EVM Compatible" doesn't mean you can just plug Ethereum into Polkadot or vica versa, it just means they both understand Ethereum bytecode and you can potentially copy/paste contracts from Ethereum to Polkadot, but you'd still need to add a "bridge" between the 2 chains, so it adds additional complexity and extra steps compared to using any of the existing L2 scaling solutions
That only applies of you are thinking from an Eth maximalist perspective. But if you think from Polkadot's side, why would you need to use the bridge back to Ethereum at all? Everything will be seamless, cheaper, and quicker once the ecosystem starts to flourish.
I see a bunch of posts about how Ethereum and Polkadot can thrive together, but are they not both L1 competitors?
They are competitors. Both have their strategies, and both have their strengths (tech vs time on the market) but they are clearly competing in my eyes. Which is a good thing, Apple and Samsung competing in the cell phone market just leads to more innovation for consumers. You can still invest in both if you like. Edit - link to post and the rest of the conversation: https://www.reddit.com/ethfinance/comments/iooew6/daily_general_discussion_september_8_2020/g4h5yyq/ Edit 2 - one day later PolkaProject count is 210. Devs are getting the hint :)
the year 2020 in Bitcoin Cash so far: a detailed history
the year 2020 in Bitcoin Cash so far: a detailed history What follows at the bottom is a four page long chronological overview of what happened in BCH in 2020 so far. To make it more digestable and fun to read I start with my narrating of the story. My attempt was to remain as objective as possible and "let the facts speak for themselve" with everything sourced. I also link to manyread.casharticles, the decision of which are the important ones to include is certainly not easy, I count on the rest of the community if I overlooked anything important. summary & my narrating of the story: The year started out relatively calm, with cashfusion in "the news" and an older ongoing controversy between Amaury and Roger Ver being worked out. Starting Jan 22nd all debate broke loose with the announcement of “Infrastructure Funding Plan for Bitcoin Cash” by Jiang Zhuoer of BTC.TOP. To illustrate this point 2 days later coinspice ran the title " Roger Ver Praises Vigorous Debate, [...]" and 6 days, less than a week, later Chris Pacia made a read.cash post titled "The 253rd "Thoughts on developer funding" Article" which might have been only a slight exaggeration or he might have been counting. Part of the reason of the tsunami was the lack of worked out details. By the time of Pacia's post a lot had changed: Both BU, Bitcoin Verde and a group of miners had made announcements not to go along with "the plan". On feb 1st, the second version of the IFP was announced by Jiang Zhuoer in a post “BCH miner donation plan update”. Two weeks later on Feb 15th, the third iteration was announced by Bitcoin ABC which was to be activated by hashrate voting and on the same day Flipstarter was introduced, a sign of the search for alternative solutions. After a few more days and a few more people coming out more against the IFP (including Jonald Fyookball, Mark Lundeberg & Josh Ellithorpe), BCHN was announced on feb 20th with a formal release a week later. Also feb 27th, the DAA was brought back into the conversation by Jonathan Toomim with his " The BCH difficulty adjustment algorithm is broken. Here's how to fix it." video. By early march the IFP was effectively dead with its author Jiang Zhuoer vowing to vote against it. This became clear to everyone when ABC, a day later sudddenly shifted gears towards non-protocol, donation based funding: the IFP was dead. End march ABCs 2020 Business Plan was announced as a way to raise $3.3 million. Mid april to mid may was the high time for voluntary funding with four node implementations and General Protocols, a BCH DeFi Startup successfully raising funds. By May 15th, the 6th HF network upgrade things had pretty much cooled down. The upgraded included nothing controversial and even saw an unexpected doubling in the unconfirmed transaction chain. June 15th a month later things started to heat up again with the BCHN announcement to remove the "poison pill" or "automatic replay protection". 8th Jul Jonathan Toomim posted "BCH protocol upgrade proposal: Use ASERT as the new DAA" which promised the solution to the long dragging DAA problem. Jul 23th however an unexpected twist occurred when Amaury Séchet posted "Announcing the Grasberg DAA" an incompatible, alternative solution. This, again, sparked a ton of debate and discussion. Grasberg lasted just two weeks from Jul 23th to Aug 6th when ABC announced its plans for the november 2020 upgrade but it had successfully united the opposition in the meanwhile. ABCs plan for november included dropping grasberg in favour of aserti3–2d and introducing IFPv4. Now we're here August 8th, the IFP which was declared dead after just over a month (Jan 22-Mar 5) is now back in full force. The rest of the history is still being written but if p2p electronic cash is to succeed in any big regard it's very thinkable that these events will get into history books. Important resources:coinspice IFP timeline&Compiled list of BCH Miner Dev Fund posts, articles, discussions History Jan 13th : “Do CoinJoins Really Require Equal Transaction Amounts for Privacy? Part One: CashFusion” article by BitcoinMagazine [source] Jan 13th : “Clearing the Way for Cooperation” Read.cash article by Amaury Séchet [source] on the controversy with Roger Ver about the amount of donations over the years Jan 22nd : “Infrastructure Funding Plan for Bitcoin Cash” IFPv1 announced by Jiang Zhuoer of BTC.TOP [source] IFPv1: 12.5% of BCH coinbase rewards which will last for 6 months through a Hong Kong-based corporation & to be activated on May 15th Jan 22nd : ”Bitcoin Cash Developers React to Infrastructure Fund Announcement: Cautiously Optimistic” coinspice article including Amaury Séchet, Antony Zegers, Jonald Fyookball & Josh Ellithorpe [source] Jan 23rd : Jiang Zhuoer reddit AMA [source] [coinspice article] Jan 23rd : Vitalik weighs in with his take on twitter [source] Jan 23rd :” On the infrastructure funding plan for Bitcoin Cash” article by Amaury Séchet [source] [coinspice article] in which he proposed to place control of the IFP key in his hands together with Jonald Fyookball and Antony Zegers. . A group of 7 to 12 miners, developers, and businessmen in total would get an advisory function. Jan 24th : “Bitcoin.com's Clarifications on the Miner Development Fund“ which emphasizes, among other things, the temporary and reversible nature of the proposal [source] [coinspice article] Jan 24th : “Little Known (But Important!) Facts About the Mining Plan” Read.cash article by Jonald Fyookball in which he defended the IFP and stressed its necessity and temporary nature. Jan 25th : massive amounts of public debate as documented by coinspice [coinspice article] with Justin Bons, Tobias Ruck and Antony Zegers explaining their take on it. Jan 26th : public debate continues: “Assessment and proposal re: the Bitcoin Cash infrastructure funding situation” Read.cash article by imaginary_username [source] which was noteworthy in part because the post earned over Earns $1,000+ in BCH [coinspice article] and “The Best Of Intentions: The Dev Tax Is Intended to Benefit Investors But Will Corrupt Us Instead” by Peter Rizun [source] Jan 27th : “We are a group of miners opposing the BTC.TOP proposal, here's why” article on Read.cash [source] [reddit announcement] Jan 27th : Bitcoin Unlimited's BUIP 143: Refuse the Coinbase Tax [source][reddit announcement] Jan 28th : “Bitcoin Verde's Response to the Miner Sponsored Development Fund” read.cash article by Josh Green in which he explains “Bitcoin Verde will not be implementing any node validation that enforces new coinbase rules.” [source] Jan 28th : “Update on Developer Funding” read.cash article from Bitcoin.com [source] in which they state “As it stands now, Bitcoin.com will not go through with supporting any plan unless there is more agreement in the ecosystem such that the risk of a chain split is negligible.” And that “any funding proposal must be temporary and reversible.” This announcement from bitcoin.com and their mining pool lead the anonymous opposition miners to stand down. [source] Jan 28th : The 253rd "Thoughts on developer funding" Article – by Chris Pacia, to tackle the “serious misconceptions in the community about how software development works”. He ends on a note of support for the IFP because of lack of realistic alternatives. [source] Feb 1st: “BCH miner donation plan update” IFPv2 announced by Jiang Zhuoer of BTC.TOP [source] Which changes the donation mechanism so miners directly send part of their coinbase to the projects they wants to donate to. It would be activated with hashrate voting over a 3-month period with a 2/3 in favour requirement. The proposal also introduces a pilot period and a no donation option, Jiang Zhuoer also says he regards 12.% as too much. Feb 7th: Group of BCH miners led by AsicSeer voice scepticism about the IFP during a reddit AMA [source] Feb 15th: “On the Miner Infrastructure Funding Plan” article by Bitcoin ABC [source] In which they announce they will implement IFPv3 in their upcoming 0.21.0 release. This version has amount reduced to 5% of block reward and will go in effect with BIP 9 hashratevoting and a whitelist with different projects. Feb 15th : “Introducing Flipstarter” [source] Feb 16th :” Bitcoin.com’s stance on the recent block reward diversion proposals” video by Roger Ver on the Bitcoin.com Official Channel. [source] > Ver called Zhuoer’s IFP “clever” but ultimately “problematic.” [coinspice article] Feb 16th :” BCH miner donation plan update again” read.cash article by Jiang Zhuoer of BTC.TOP [source] In which he briefly outlines the details of IFPv3 Feb 17th : “Latest Thoughts On Infrastructure Mining Plan” post by Jonald Fyookball [source] Feb 17th : “Regarding the Bitcoin Cash Infrastructure Funding Plan, I am certain now that it should be scrapped immediately.” tweet by Mark Lundeberg [source] Feb 19th : “Thoughts on the IFP - A Dev Perspective“ read.cash article by Josh Ellithorpe [source] Feb 20th : “Bitcoin Cash Node” post announcing the new node implementation [source] Feb 20th : First “Bitcoin Cash Developer Meeting” After IFP Proposal [source] Feb 24th : “Flipstarter 500k, 6 independent campaigns” post announcing the goal to “fund the BCH ecosystem with 6 independent campaigns and an overall 500,000 USD target” [source] Feb 27th : BCHN Formally Released [source] Feb 27th : “The BCH difficulty adjustment algorithm is broken. Here's how to fix it.” Video by Jonathan Toomim [source] Mar 3th :” Bitcoin Cash Node 2020: plans for May upgrade and beyond” post by BCHN [source] Mar 4th :”Author of the Bitcoin Cash IFP [Jiang Zhuoer] Vows to Vote Against It, Using Personal Hash in Opposition” [source] Mar 5th :Bitcoin ABC announces their 2020 Business Plan Fundraising for later in march [source] Mar 15th : “EatBCH campaign funded! Next: node campaigns.” campaign funded after 11 hours [source] Mar 30th : Bitcoin ABC 2020 Business Plan [source] $3.3 Million Fundraiser [source] Apr 17th : Five flipstarter node campaign launched. [source] Apr 26th : BCHN flipstarter campaign successfully funded. [source] Apr 27th : VERDE flipstarter campaign successfully funded. [source] May 4th : KNUTH flipstarter campaign successfully funded. [source] May 7th : “BCH DeFi Startup General Protocols Raises Over $1 mil“ [source] May 8th : BCHD flipstarter campaign successfully funded. [source] May 9th : Deadline for node campaigns, ABC flipstarter campaign not funded. [source] May 14th : “With IFP Defeated, Bitcoin ABC, ViaBTC & CoinEX CEO Publicly Consider a Bitcoin Cash Foundation” [source] May 15th : deadline for ABC fundraiser campaign, ends at 55% completed. [source] May 15th : 6th HF network upgrade -> new opcode op_Reversebytes, increased of the chained transaction limit from 25 to 50, and the improved counting of signature operations using the new “Sigchecks” implementation [source] with the “Controversial Funding Plan Rejected by Miners” [source] May 25th : “Announcing the SLP Foundation” [source] Jun 15st : “BCHN lead maintainer report 2020-06-15” announcement to remove the Automatic Replay Protection (a.k.a. the Poison Pill) from BCHN in november [source] Jun 16st : “So [BCHN] is going to fork off from BCH at the next upgrade. Same old story. […]” tweeted Vin Armani [source] Jun 21st : “Why Automatic Replay Protection Exists” post by Shammah Chancellor [source] Jul 7th : “The Popular Stablecoin Tether Is Now Circulating on the Bitcoin Cash Network” [source] Jul 8th : “BCH protocol upgrade proposal: Use ASERT as the new DAA” post by Jonathan Toomim [source] Jul 18th : “$6M Worth of Tether on the Bitcoin Cash Chain Highlights the Benefits of SLP Tokens” [source] Jul 23th : “Announcing the Grasberg DAA” post by Amaury Séchet[source] Jul 24th : “Thoughts on Grasberg DAA” post by Mark Lundeberg [source] Jul 29th : CashFusion security audit has been completed [source] Jul 31st : Electron Cash 4.1.0 release with CashFusion support [source] 4th year, august 2020 – 2021 Aug 1st : “Bitcoin Cash: Scaling the Globe“ Online conference for ForkDay Celebration [source] Aug 2nd : >“Is there going to be a fork between ABC and BCHN?” > “IMO it is very likely. If not in November, then next May.” – Amaury Séchet Aug 3rd : “Dark secrets of the Grasberg DAA” post by Jonathan Toomim [source] Aug 3rd : “Joint Statement On aserti3-2d Algorithm“ post by General Protocols, including Cryptophyl, Read.cash, Software Verde & SpinBCH [source] Aug 3rd : Knuth announces they will be implementing aserti3-2d as DAA for november. [source] Aug 3rd : Amaury rage quit from the developer call [source] Aug 4th : “But why do people care about compensating for historical drift? Seems like a tiny problem and if it's causing this much social discord it seems not even worth bothering to try to fix.” Tweet by Vitalik [source] Aug 5th : “Bitcoin Cash (BCH) November 2020 Upgrade statement” signed by BCHD, electron cash, VERDE, BU members, BCHN developers, Jonathan Toomim, Mark B. Lundeberg and many others [source] Aug 5th : “BCHN FAQ on November 2020 Bitcoin Cash network upgrade” [source] Aug 6th : “Bitcoin ABC’s plan for the November 2020 upgrade” [source] the announcement that they will drop Grasberg in favour of aserti3–2d (ASERT) and will also include FPv4 in which 8% of the blockreward goes to ABC as development funding. Aug 7th : “Joint Statement from BCH Miners regarding Bitcoin ABC and the November 2020 BCH Upgrade.” Read.cash article by asicseer [source] stating “Over recent months, most miners and pools have switched to BCHN, and presently operate a majority of BCH hashrate.” Aug 7th : “Simple Ledger Protocol's Joint Statement Regarding Bitcoin ABC on BCH's November 2020 Upgrade” read.cash post by the SLP-Foundation [source]
The Legend of Tesla’s Bitcoin!⚡️ 3 x Tesla Giveaway , 5 BTC and 100ETH, best RPG cross chain dapp
⚡️The Legend of Tesla’s Bitcoin!⚡️ https://preview.redd.it/9e5a0nc40jg51.png?width=1024&format=png&auto=webp&s=ddee1e7903e6a2268a5eeedfd0c7575931e68241 ChainZ Arena is the first-ever cross-blockchain/platform idle mining RPG game, giving its a unique gameplay pitting TRON VS. EOS VS. ETH in one Arena. Combining EOS, Ethereum and the TRON blockchain allowing users to join together in one virtual world where only one can reign supreme. The only thing that is left for you to do is try it out and defend your blockchain! If you are new to Chainz Arena, read our guide here: https://medium.com/@ChainZArena/the-guide-to-chainz-arena-5baa5510c715 Here are more details about the event ! ⭐️Each Advanced Summon will be rewarded with a King’s Chest. to open a chest you will need to consume King’s chest or 1.8 SOUL (cannot use frozen SOUL). Each King’s Chest will contain one of the following: ⭐️Tesla Model 3 (total 2) ⭐️BTC (total 4) ⭐️ETH x 10 (total 9) ⭐️Dragon Orbs 1–9 stars ⚡️ChainZ Conqueror- Event 2⚡️ ⭐️Dragon Orbs can be exchanged for SOUL rewards. You will also receive Elon’s Star points. Star points will be used in the Leaderboard. ⭐️1st : 1 x Tesla Model 3 ⭐️2nd : 1 x BTC ⭐️3rd : 1 x 10 ETH ⭐️4th-200th: Share 50k SOUL ❗️Notes: a. No SOUL will be rewarded for advance summoning during the event. b. Dragon Orb rewards will be rewarded immediately, all other rewards will be sent after event ends. c. ChainZ Conqueror rewards will be sent after event ends d. Dragon orbs can be sold individually, but will not gain star points e. Tesla rewards will be delivered in selected countries only. If in any case Tesla cannot be delivered the equivalent in USDT ($42000) will be sent So one question remains are you ready to do all it takes to take part in this LEGENDARY event and be in it to win it? Play & Earn ChainZ Arena
Round up of Cryptocurrency News #2 Week 13/07 - 19/07
So much has happened this week! We saw a capitulation point of bitcoin before bears took over and we saw the selling pressure push Bitcoin down toward the $9000USD mark then move back up above $9100USD So far it has been a stable hold, however we may see some more action within the coming weeks.
Widespread scamming within the Twitter-sphere, Youtube and other platforms as Bitcoin and other cryptocurrencies may seem like fair game. Cryptocurrencies providing big payouts for scammers without the ability for reversals of accounts. Remember if something seems too good to be true, do some research or just plain do not respond/believe it. Stay safe and careful with your funds!
On the brightside, there has been even more adoption of cryptocurrencies as rumours of Paypal utilising cryptocurrency has been confirmed as they are developing crypto capabilities. In addition to this we received exciting news at the start of this week about Binance partnering with Swipe (SXP) and offering a debit card to spend BNB, SXP, BTC and BUSD. ( I will be keeping a swift eye on BNB and Swipe as its utilisation as tokens has just increased 43 fold).
Positive news for the Bitcoin network as its hashrate reaches all time high which helps to secure the network further even though mining profits have dropped by 50% from the recent halving. If you didn't know already the last Bitcoin will be expected to be mined in 2140 with its difficulty ever increasing and each time securing the network further. Processing units will have to become faster, stronger and most importantly more cost effective to continue to entice miners for the block rewards and further renewable energy practices.
Furthermore we can see Central banks and countries discussing and developing Central Bank Digital Currencies (CBDC). Read more about it here https://www.investopedia.com/terms/c/central-bank-digital-currency-cbdc.asp and check out some of the developments in the world above. This shows the popularity and strong nature of cryptocurrencies. As the saying goes "If you cant beat them, JOIN them".
Overall, very solid week full of adoption, animation and anticipation. Another post next week for a weekly round up! See you then but in the mean time join us at our Gravychain Discord. - DISCORD LINK: https://discord.gg/zxXXyuJ 🍕 Bring some virtual pizza to share 🍕 Come have a chat, stimulate a discussion, ask a question or share some knowledge. We are all friendly crypto enthusiasts up for a chat, supportive and want to help each other with knowledge and investments! Big thanks to our Telegram and My Crypto HQ for the constant news updates! - The Gravychain Collective: https://t.me/gravychain - My Crypto HQ: https://t.me/My_Crypto_HQ Important/Notable/Highlights:
Cryptocurrency exchanges process over $20 billion in trade volume per day. Most of the transactions are going through centralized exchanges, where the users need to fully trust them for managing their assests and transactions. However, the risk of trusting these centralized exchanges has also been seen. For example, QuadrigaCX, which was the largest cryptocurrency exchange in Canada, lost $19 million of their customers' assets . Decentralized Exchanges (DEXes) have been introduced to address this problem -- they allow traders to purchase and sell cryptocurrencies in a peer-to-peer manner, so no involvement of any trusted party is required. Atomic Swap is one of the promising technology for implementing a DEX. While it enables pure peer to peer trading, it also introduces problems such as unfairness and long confirmation latency. While existing work  has provided a solution towards a fair atomic swap protocol, the issue of long confirmation latency is inherent. Another promising direction is leveraging liquidity pools. With liquidity pools, pairs of assets are reserved for trading. For any pair of assets supported by the liquidity pool, traders can exchange their assets without any third party. As traders can only perform the transactions if there are reserved assets, one core problem is how to attract liquidity providers to provide liquidity by reserving assets. It is not difficult to see that incentive [3,4], which has been a key component of all permissionless blockchains, can be equipped to incentivize liqudity providers. However, flawed incentive designs will lead to attacks and other concerns [5-13]. There are two main types of incentive designs, namely "trans-fee mining" and "liquidity mining". They are different from the Proof-of-X mining in blockchains for reaching consensus (a detailed analysis can be found in the survey ). Rather, they are used to incentivise users to join the ecosystem. "Trans-fee mining" was proposed by FCoin in 2018 . With FCoin, each time a transaction is created, 100% of its transaction fee will be returned in FCoin token to the payer as a reward. This is one incentive design to encourage traders to join the system. However, as FCoin may have no value to the trader, FCoin also introduces extra reward to all coin holders -- 80% of the transaction fee in its native currency (such as ETH) will be distributed to all coin holders. So, traders are incentivized to join the system, becoming a holder of FCoin token, and obtaining a share of the transaction fee of every transaction in the FCoin ecosystem. While this had successful attracted traders, it is not sustainable. Rather than charging a trader to perform transactions, FCoin rewards traders. Profit-driven traders will create transactions at full speed to earn FCoin token and the share as a token holder. Indeed, the trading volume of FCoin was the top one among all exchange services, and the daily reward can be as high as 6000 BTC . However, once all coins are minted, then the system would lose liveness as there is not enough supply to be distributed. "Liquidity mining" aims at giving reward to the liquidity providers rather than the traders. There are different ways to implement liquidity mining. Compound  is a famous example of protocols deploying liquidity mining. With Compound, users become a liquidity provider by supply assets to a pool and obtain interests for its contribution (similar to depositing money into a bank). Liquidity providers first reserve some assets in the pool and obtain "cToken" of Compound which entitles the owner to an increasing quantity of the underlying asset. Users can use their "cToken" to borrow different assets available on the Compound and pay some interests to Compund. The borrowers may have some quick gains through the financial games . Both borrowers and liquidity providers can withdraw their asset by trading them back with "cToken". Oners of "cToken" can also manage the business direction and decisions of Compound through weighted voting. The potential concern here is that rich users might be able to take over the control of the system. Uniswap  is another popular DEX deploying liquidity mining. Uniswap incentivizes liquidity providers by giving them a share of the earned transaction fees. In particular, Uniswap changes each transaction a 0.3% fee, where 0.25% will be distributed to the liquidity providers, and 0.05% will go to the Uniswap account. One issue is how to incentivize traders. With Uniswap, traders are incentivized by the potential profit it can gain through the price difference between Uniswap and other exchanges. Uniswap price oracle is based on a constant function market makers [20,21], where the product of the number of reserved tokens is a constant. For example, if Uniswap has a pair of X token A and Y token B, then when a user using X' token A to buy Y' token B, the product of the reserved number of tokens should remain the same, i.e., XY = (X+X')(Y-Y'). The price of Uniswap (V1) is also defined in this way. This allows traders to speculate in the exchange market as the asset price on Uniswap is changed dynamically and is different from other exchanges. This, on the other hand, may have a security risk as the price can be easily manipulated. Uniswap (V2) fixed this problem by taking an accumulated price over a period of time . However, as speculation/manipulation becomes harder, the trading volume may decrease. MiniSwap  introduces a hybrid model (a mixture of "trans-fee mining" and "liquidity mining") to address the above issues. MiniSwap provides three types of rewards. For each trade with transaction fee f ETH in MiniSwap, a number of MiniSwap tokens (called MINI) worth 2f ETH will be minted. A (parameterized) portion of the tokens are given to the trader, and the rest are distribued to the liqudity providers. The transaction fee (f ETH) is used to exchange MINI in the liquidity pool. 50% of the obtained MINI will be distributed to all MINI holders, and the other 50% will be destroyed. In this way, both traders and liquidity providers are incentivized to join the ecosystem. Recall that with FCoin, there is a problem when all coins are minted. MiniSwap has an upper bound (of 500,000 tokens) on the number of tokens can be created every day, and this limit reduces every month until a point where the limit (18,000 tokens) remains unchanged. This guarantees the sustainability of the system as the mining process can last for 100 years. The parameterized ratio of tokens as the reward to the trader and liquidity provider can also strengthen sustainability. It enables the system to dynamically balance the incentive of different parties in the system to make it more sustainable. Overall, the MiniSwap hybrid model has taken the benefit of both "trans-fee mining" model and "liquidity mining" model, while eliminated the potential concerns. Formally defining and analyzing these models, e.g. through the game-theoretic approach , would be an interesting direction. Reference  The Guardian, Cryptocurrency investors locked out of $190m after exchange founder dies, 2019.  Runchao Han, Haoyu Lin, Jiangshan Yu. On the optionality and fairness of Atomic Swaps, ACM Conference on Advances in Financial Technologies, 2019.  Satoshi Nakamoto. 2008. Bitcoin: a peer-to-peer electronic cash system  Jiangshan Yu, David Kozhaya, Jeremie Decouchant, and Paulo Verissimo. Repucoin: your reputation is your power. IEEE Transactions on Computers, 2019.  Joseph Bonneau. Why Buy When You Can Rent? - Bribery Attacks on Bitcoin-Style Consensus. Financial Cryptography and Data Security - International Workshops on BITCOIN, VOTING, and WAHC, 2016.  Yujin Kwon, Hyoungshick Kim, Jinwoo Shin, and Yongdae Kim. Bitcoin vs. Bitcoin Cash: Coexistence or Downfall of Bitcoin Cash, IEEE Symposium on Security and Privacy (SP), 2019.  Kevin Liao and Jonathan Katz. Incentivizing blockchain forks via whale transactions. International Conference on Financial Cryptography and Data Security, 2017.  Ayelet Sapirshtein, Yonatan Sompolinsky, and Aviv Zohar. Optimal Selfish Mining Strategies in Bitcoin. Financial Cryptography and Data Security, 2016.  Ittay Eyal and Emin Gün Sirer. Majority Is Not Enough: Bitcoin Mining Is Vulnerable. Financial Cryptography and Data Security, 2014.  Ittay Eyal. The Miner’s Dilemma. IEEE Symposium on Security and Privacy, 2015.  Miles Carlsten, Harry A. Kalodner, S. Matthew Weinberg, and Arvind Narayanan. On the Instability of Bitcoin Without the Block Reward. ACM SIGSAC Conference on Computer and Communications Security, 2016.  Kartik Nayak, Srijan Kumar, Andrew Miller, and Elaine Shi. Stubborn mining: generalizing selfish mining and combining with an eclipse attack. IEEE European Symposium on Security and Privacy, 2016.  Runchao Han, Zhimei Sui, Jiangshan Yu, Joseph K. Liu, Shiping Chen. Sucker punch makes you richer: Rethinking Proof-of-Work security model, IACR Cryptol. ePrint Arch, 2019.  Christopher Natoli, Jiangshan Yu, Vincent Gramoli, Paulo Jorge Esteves Veríssimo. Deconstructing Blockchains: A Comprehensive Survey on Consensus, Membership and Structure. CoRR abs/1908.08316, 2019.  FCoin, https://www.fcoin.pro  The Block Crypto. Cryptocurrency exchange Fcoin expects to default on as much as $125M of users' bitcoin, 2020.  Compound, https://compound.finance.  Philip Daian, Steven Goldfeder, Tyler Kell, Yunqi Li, Xueyuan Zhao, Iddo Bentov, Lorenz Breidenbach, Ari Juels. Flash Boys 2.0: Frontrunning, Transaction Reordering, and Consensus Instability in Decentralized Exchanges. IEEE Symposium on Security and Privacy, 2020.  Uniswap. https://uniswap.org  Bowen Liu, Pawel Szalachowski. A First Look into DeFi Oracles. CoRR abs/2005.04377, 2020.  Guillermo Angeris, Tarun Chitra. Improved Price Oracles: Constant Function Market Makers, CoRR abs/ 2003.10001, 2020.  Uniswap V2.0 whitepaper. https://uniswap.org/whitepaper.pdf  MiniSwap. https://www.miniswap.org  Ziyao Liu, Nguyen Cong Luong, Wenbo Wang, Dusit Niyato, Ping Wang, Ying-Chang Liang, Dong In Kim. A Survey on Blockchain: A Game Theoretical Perspective. IEEE Access, 2019.
PoW or PoS: The Difference Between Mined and Non-Mined Crypto
The whole crypto world discusses how Ethereum will switch from Proof of Work to Proof of Stake now. This change can significantly affect the cryptocurrency market. What are the positive and negative sides of PoW and PoS? Cryptocurrencies can be divided into two types: those that can be mined (Bitcoin, Litecoin, Monero) and pre-mined ones (Ripple, Stellar, Cardano, EOS, NEO).
What is the big difference?
Although they differ in the method of generation, the basis of both types of crypto is the same: verification. Every transaction processed by the network must be verified by someone to ensure that virtual money has not been spent twice. Here we are talking about the difference in the verification process. Transaction groups are combined into a block; after verification, the block joins other previously confirmed blocks, and create a chain of transactions, or blockchain.
PoW: Mined Crypto
Mining is a process in which individuals, groups, or companies solve complex mathematical equations to verify transaction blocks using powerful computers. These math problems are part of the encryption process that protects transactions from cybercriminals and third party access. The first who solves the problem and signs a block of transactions receives a reward. The miner, who confirmed the block of transactions e.g. in the Bitcoin network, receives a reward in BTC.
Disadvantages of Mined Crypto
Mining can be very expensive due to the large amounts of electricity consumed. In mined crypto with less capitalization, competition is usually lower than in BTC.
BTC mining requires special ASIC chips, that are combined into huge farms. Electricity is one of the main expenses for these projects. That is why China, where electricity is relatively cheap, has become a home to four of the five largest Bitcoin mining companies in the world.
Mining farms have to spend significant money funds on new equipment, which becomes out of date very fast.
Large projects need additional cooling, as servers and graphics cards heat up to high temperatures during operations.
The Proof-of-Work model is potentially vulnerable to a 51% attack (when a group of people with 51% of the computing power gains control of the network and its participants). For popular cryptocurrencies such as Bitcoin (BTC), Litecoin (LTC), and Monero (XMR) this is not a problem due to their large capitalization. However, minor cryptocurrencies with long block processing times and low daily volumes are risking a lot.
PoS: Non-Mined Crypto
At the other end of the spectrum are pre-mined cryptocurrencies such as Ripple (XRP), Stellar, Cardano, EOS, and NEO. In the PoS model, super-powered computers are not needed, and participants do not compete for the right to sign the next block. Thus, the costs of this approach are significantly lower. Transaction verification is carried out by cryptocurrency owners. The more cryptocurrencies you have, the longer you own it, the higher the probability that you will be selected to check the transaction block. Certain mechanisms are built into the system that prevents the dominance of large cryptocurrency holders over the verification process. There are many random ways to select owners who get the right to sign a transaction block. This ensures that small holders have a chance to participate in the process.
Disadvantages of Non-Mined Crypto
Despite the fact that the costs of the Proof-of-Stake method are lower, PoS has its drawbacks.
Such cryptocurrencies are not threatened by an attack of 51%, however, another trouble replaces it — a person who posses 51% of all tokens in circulation can gain control of the network and its participants. Of course, in the case of cryptocurrencies with high capitalization, the possibility of this scenario is low, but small partners may suffer from this vulnerability.
The Proof-of-Stake model also gives major owners additional votes in determining the future development of the network. Most NEO tokens) belong to several founders, for instance. This helps increase transaction speed and reduces consensus-building time, but also makes cryptocurrency too centralized. In other words, in the PoS model, large players gain significant power, which is theoretically impossible with the PoW model.
Which method is better?
Both methods have their pros and cons. Nevertheless, sooner or later, some of the largest mined currencies (e.g. BTC) will reach their token limit. At this point, they will have to switch to Proof-of-Stake. Since it significantly reduces power consumption and doesn't require powerful computers, gradually all crypto including BTC will switch to a non-mined model just like Ether did.
If history is any guide, we’re not going to see ETH 2.0 until 2022 at the earliest, even if the earliest phases of “Serenity” begin getting pushed in mid-2020. ETH 2.0’s rollout breaks down into seven (7!!!) phases and brings with it the promise of staking, sharding, a new virtual machine, and more dancing badgers. (One of our analysts,Wilson Withiam, put together an excellent overview of both the ETH 2.0 and ETH 1.x roadmaps for this report. They are critical to track and understand at a high-level given how much Ethereum’s performance will affect other competitive projects and most of the DeFi and Web 3 infrastructure. So these next two sections are longer and more technical.) Here’s what you need to know about the current game plan for crypto’s largest platform. Phase 0 marks the launch of the “beacon chain”, which will serve as the backbone for a new blockchain. The beacon chain will manage network validators (large early stakers like ConsenSys) and ultimately assign validators to individual shards (slicing the new blockchain into smaller chunks is a key, difficult, controversial scaling decision that’s been made). The new chain will support Ethereum’s new proof-of-stake consensus mechanism, and offer inflation rewards with new ETH2 for those that pony up and lock 32 ETH1 tokens into an irreversible contract. That one way bridge into the new system is also contentious, but it means ETH1 supply will start getting “effectively burned”once token holder begin claiming beacon chain validator slots. Initial reports claimed Jan. 3 as a realistic launch date (lol). It will be amazing to see this launched by end of June. Phase 1 will introduce 64 individual shard chains (reduced from 1,024!!!) to the network, with the option to increase the total down the road as the design gets tested. The Ethereum elite see sharding as the “key to future scalability” as shards can parallelize transaction processing, something that could improve network performance and reduce individual validator’s costs (good for decentralization). It comes with big risk: this is still theoretical. No network the size of Ethereum has successfully sharded its blockchain. In Phase 1, shard chains will only contain simple data sets (no smart contracts or transaction executions) to test the system’s structure. As with Phase 0, the beacon chain will continue to run in parallel with ETH 1.x throughout the phase. Don’t expect Phase 1 anytime before 2021. Phase 2 marks the full launch of the ETH2 chain, allowing for on-chain contract execution and introducing the new eWASM virtual machine (dubbed EVM 2.0). At this point, existing dApps can start migrating their contracts from ETH 1.x to a specific shard (one shard per contract) in the new network. Storage rent, charging contract owners for storing data on the network (more on this below), is in the cards as well, which would require mass contract rewrites. Even though Phase 2 intends to replace the original Ethereum blockchain entirely, ETH 1.x may still live on as a shard within ETH2. (How confused are you by now? See why bitcoin will still dominate the macro narrative for a while?) A late 2021 release for Phase 2 is optimistic. Before the end of 2022 would be a win. The final four phases are less defined, and without an attached timeline: Phase 3 implements state-minimized clients (because stateless clients are just too much). Phase 4 allows for cross-shard transactions. Phase 5 improves network security and the availability of data proofs. Phase 6 introduces meta-shards, as in “shards within shards within shards,” for near-infinite scaling. If you’re scratching your head and are sadistic enough to read more, the Sharding Wiki page does note, “this may be difficult.” Scaling and compilation efficiencies aside, the most notable change in Ethereum’s metamorphosis is the transition from proof-of-work to proof-of-stake. PoW is the more battle tested security model for blockchain networks, while PoS may prove to be more efficient but with new and less obvious attack vectors. For the more technical, we recommend reading Bison Trails’ Viktor Bunin on the subject of PoS security threats. Past research has also shown PoS requires an extra layer of “trust” vs. PoW, to help nodes sync to the network. Most models share specific characteristics to address this trust issue, such as allowing for a dynamic set of validators (rotate your security), promoting token holder participation in consensus, and assessing steep penalties (slashing) for any network participant that violates the protocol guidelines. ETH 2.0 will function similarly, but may be able to learn from other PoS networks (and their R&D) as well as those come live and see real world issues. As Vitalik points out, recent research in PoS resulted in “great theoretical progress,” But... Listen, we're talking about practice. Not a game. Not a game. Not a game. We're talking about practice. Not a game….Practice? We're talking about practice, man? We're talking about practice. We're talking about practice. We ain't talking about the game. We're talking about practice, man. Vitalik was eight when this happened, so the clip might help and prove metaphoric.
2 ETH 1.x Research/Governance/Roadmap at a glance.
Ok, one more. Bear with us. Let’s reiterate, ETH 2.0 is a brand new blockchain. It’s going to be a chaotic and high-risk transition. In the meantime, the existing network needs to run existing applications (particularly financial settlements for DeFi transactions). More critical upgrades are needed in the current system. To that end, ETH 1.x devs have three goals to boost performance and reduce blockchain bloat: (1) introduce client optimizations that increase transaction capacity; (2) cap disk space requirements and prune old, memory-sucking data (so running a node is less expensive and more decentralized); and (3) upgrade the EVM to eWASM, a newer open standard for code compilers that simplifies debugging, and is also used by all the newer smart contract platforms. ETH 1.x developers have decided to split the major tasks amongst four working groups:
State Rent: Developers today incur a single payment for deploying contracts and storing data on the network. Thanks to the immutable nature of blockchains, this data occupies the disk space of node operators permanently. As the network’s state grows, so do operating costs, which is where “state rent” comes in. It makes sense to charge for ongoing storage needs since the node operators are on the hook in perpetuity. This is a big change as it could break a bunch of contracts, but also limits state growth and creates economic incentives to run a node. What happens to data that users don’t want to pay for? Boot delinquent user data off the network but keep a stub (a hash) of information on hand in case the user wants to later reinstate it.
Pruning: Similar goal. Pruning removes old data that is longer useful, but does so in a way that allows clients to prove past transactions. There are a couple of ways developers think this is possible (e.g. maintain a proof of deleted chain segments, which is similar to a “light client” in bitcoin that makes it possible to run a wallet on your phone), but all current strategies would cap annual “state growth” to prevent spikes in storage costs, at the expense of some new complications (e.g., dApps might be unable to access some data, and nodes might be unable to tell if data was deleted or whether it never existed in the first place).
eWASM: Like ETH 2.0, devs plan to implement eWASM on the flagship Ethereum chain. The eWASM virtual machine, a subset of the well-established WebAssembly compiler, offers improved flexibility for the introduction of “high-performance” smart contracts.
Simulation and Emulation: This group develops tools to help support and evaluate the other groups because, well, someone has to test everything.
Core developers intend to introduce most of these implementations through a series of hard forks, the latest of which activated just over a week ago (Istanbul, Dec. 7). However, Istanbul’s second phase, tentatively scheduled for Q2 next year, has Ethereans at each other’s throats. The controversy boils down to the fork’s inclusion of ProgPoW, an ASIC-resistant hashing algorithm designed to replace Ethereum’s current algo. ProgPoW aims to even the playing field for GPU miners and ward off the entrance of potential ASIC competitors. The miners like that. But many miners and investors see ProgPoW as a threat to their investments. For miners, the change would shift the power dynamic away from mining farms and render expensive, specialized mining hardware useless. Ethereum (and ERC-20) investors intent on securing their assets might balk because ASIC miners typically prop up hash rates (overall chain security) and their costs “naturally create a price-floor for ASK prices of miners’ sell-orders.” This saga is far from over. The infighting will likely continue leading up to ProgPoW’s activation date mid-next year, and presents the strongest potential for a network split since “The DAO” fork that spawned Ethereum Classic. The looming transition to ETH 2.0 (and proof-of-stake) will likely deter investor pushback, because it’s a short-term battle in a war the miners are ultimately going to lose, anyway. Unless the roadmap changes back to supporting a hybrid PoW/PoS system, of course, but... Oh my god, I’m just kidding. This section is mercifully over.
A double-spend occurs when the same funds are spent more than once. The term is used almost exclusively in the context of digital money — after all, you’d have a hard time spending the same physical cash twice. When you pay for a coffee today, you hand cash over to a cashier who probably locks it in a register. You can’t go to the coffee shop across the road and pay for another coffee with the same bill. In digital cash schemes, there’s the possibility that you could. You’ve surely duplicated a computer file before — you just copy and paste it. You can email the same file to ten, twenty, fifty people. Since digital money is just data, you need to prevent people from copying and spending the same units in different places. Otherwise, your currency will collapse in no time. For a more in-depth look at double-spending, check out Double Spending Explained.
Why is Proof of Work necessary?
If you’ve read our guide to blockchain technology, you’ll know that users broadcast transactions to the network. Those transactions aren’t immediately considered valid, though. That only happens when they get added to the blockchain. The blockchain is a big database that every user can see, so they can check if funds have been spent before. Picture it like this: you and three friends have a notepad. Anytime one of you wants to make a transfer of whatever units you’re using, you write it down — Alice pays Bob five units, Bob pays Carol two units, etc. There’s another intricacy here — each time you make a transaction, you refer to the transaction where the funds came from. So, if Bob was paying Carol with two units, the entry would actually look like the following: Bob pays Carol two units from this earlier transaction with Alice. Now, we have a way to track the units. If Bob tries to make another transaction using the same units he just sent to Carol, everyone will know immediately. The group won’t allow the transaction to be added to the notepad. Now, this might work well in a small group. Everyone knows each other, so they’ll probably agree on which of the friends should add transactions to the notepad. What if we want a group of 10,000 participants? The notepad idea doesn’t scale well, because nobody wants to trust a stranger to manage it. This is where Proof of Work comes in. It ensures that users aren’t spending money that they don’t have the right to spend. By using a combination of game theory and cryptography, a PoW algorithm enables anyone to update the blockchain according to the rules of the system.
How does PoW work?
Our notepad above is the blockchain. But we don’t add transactions one by one — instead, we lump them into blocks. We announce the transactions to the network, then users creating a block will include them in a candidate block. The transactions will only be considered valid once their candidate block becomes a confirmed block, meaning that it has been added to the blockchain. Appending a block isn’t cheap, however. Proof of Work requires that a miner (the user creating the block) uses up some of their own resources for the privilege. That resource is computing power, which is used to hash the block’s data until a solution to a puzzle is found. Hashing the block’s data means that you pass it through a hashing function to generate a block hash. The block hash works like a “fingerprint” — it’s an identity for your input data and is unique to each block. It’s virtually impossible to reverse a block hash to get the input data. Knowing an input, however, it’s trivial for you to confirm that the hash is correct. You just have to submit the input through the function and check if the output is the same. In Proof of Work, you must provide data whose hash matches certain conditions. But you don’t know how to get there. Your only option is to pass your data through a hash function and to check if it matches the conditions. If it doesn’t, you’ll have to change your data slightly to get a different hash. Changing even one character in your data will result in a totally different result, so there’s no way of predicting what an output might be. As a result, if you want to create a block, you’re playing a guessing game. You typically take information on all of the transactions that you want to add and some other important data, then hash it all together. But since your dataset won’t change, you need to add a piece of information that is variable. Otherwise, you would always get the same hash as output. This variable data is what we call a nonce. It’s a number that you’ll change with every attempt, so you’re getting a different hash every time. And this is what we call mining. Summing up, mining is the process of gathering blockchain data and hashing it along with a nonce until you find a particular hash. If you find a hash that satisfies the conditions set out by the protocol, you get the right to broadcast the new block to the network. At this point, the other participants of the network update their blockchains to include the new block. For major cryptocurrencies today, the conditions are incredibly challenging to satisfy. The higher the hash rate on the network, the more difficult it is to find a valid hash. This is done to ensure that blocks aren’t found too quickly. As you can imagine, trying to guess massive amounts of hashes can be costly on your computer. You’re wasting computational cycles and electricity. But the protocol will reward you with cryptocurrency if you find a valid hash. Let’s recap what we know so far:
It’s expensive for you to mine.
You’re rewarded if you produce a valid block.
Knowing an input, a user can easily check its hash — non-mining users can verify that a block is valid without expending much computational power.
So far, so good. But what if you try to cheat? What’s to stop you from putting a bunch of fraudulent transactions into the block and producing a valid hash? That’s where public-key cryptography comes in. We won’t go into depth in this article, but check out What is Public-Key Cryptography? for a comprehensive look at it. In short, we use some neat cryptographic tricks that allow any user to verify whether someone has a right to move the funds they’re attempting to spend. When you create a transaction, you sign it. Anyone on the network can compare your signature with your public key, and check whether they match. They’ll also check if you can actually spend your funds and that the sum of your inputs is higher than the sum of your outputs (i.e., that you’re not spending more than you have). Any block that includes an invalid transaction will be automatically rejected by the network. It’s expensive for you to even attempt to cheat. You’ll waste your own resources without any reward. Therein lies the beauty of Proof of Work: it makes it expensive to cheat, but profitable to act honestly. Any rational miner will be seeking ROI, so they can be expected to behave in a way that guarantees revenue.
Proof of Work vs. Proof of Stake
There are many consensus algorithms, but one of the most highly-anticipated ones is Proof of Stake (PoS). The concept dates back to 2011, and has been implemented in some smaller protocols. But it has yet to see adoption in any of the big blockchains. In Proof of Stake systems, miners are replaced with validators. There’s no mining involved and no race to guess hashes. Instead, users are randomly selected — if they’re picked, they must propose (or “forge”) a block. If the block is valid, they’ll receive a reward made up of the fees from the block’s transactions. Not just any user can be selected, though — the protocol chooses them based on a number of factors. To be eligible, participants must lock up a stake, which is a predetermined amount of the blockchain’s native currency. The stake works like bail: just as defendants put up a large sum of money to disincentivize them from skipping trial, validators lock up a stake to disincentivize cheating. If they act dishonestly, their stake (or a portion of it) will be taken. Proof of Stake does have some benefits over Proof of Work. The most notable one is the smaller carbon footprint — since there’s no need for high-powered mining farms in PoS, the electricity consumed is only a fraction of that consumed in PoW. That said, it has nowhere near the track record of PoW. Although it could be perceived as wasteful, mining is the only consensus algorithm that’s proven itself at scale. In just over a decade, it has secured trillions of dollars worth of transactions. To say with certainty whether PoS can rival its security, staking needs to be properly tested in the wild.
Proof of Work was the original solution to the double-spend problem and has proven to be reliable and secure. Bitcoin proved that we don’t need centralized entities to prevent the same funds from being spent twice. With clever use of cryptography, hash functions, and game theory, participants in a decentralized environment can agree on the state of a financial database.
This is all ridiculously hypothetical; and is probably best ignored. Bust, having had the thought, I can’t stop thinking about it. So if you are in to detailed descriptions of low probability events, please enjoy the rabbit hole. I know people like the idea of a gold standard, but it is unpalatable. Having worked in mining, there is a tail risk a deposit can be found which devalues existing assets. It is pegging your finances to the unknown, and it was abandoned for a reason. This is why, since World War II, the USD has been a global reserve currency. And it kept this role after it abandoned the gold standard in the 1970’s. This has remained the case for a number of reasons: 1) The US has been a surprisingly large chunk of global GDP: in the post WWI world under the Bretton Woods system, the US at one point represented 50% of GDP, crucially at a time when other countries were getting their financial house in order. US treasuries, particularly when the dollar was still backed by gold, were one of the safest investments. A reminder that US debt isn’t just about profligacy, but also about long-term yields. 2) This created a built-in house wins effect - when the US removed the gold standard, countries stayed with the USD because it was still so stable compared to other options - and they were already heavily invested. As a fiat, the US can run higher deficits because other counties hand it cash for their own stability stability (you can almost think of US debt like tribute to a dominant political power, or protection money to the mafia). 3) No competitors. I understand the skepticism about fiat in this community - but if you had to choose a fiat, what would be the alternative to the USD? The Renminbi’s value is manipulated by Chine. The Euro lacks a body like the US federal reserve to intervene in the event of inflation, and the block is increasingly unstable. The US government has supported its currency as the global reserve currency because it vastly strengthens its hand in international diplomacy. US sanctions against countries like Iran are effective because the US can enforce financial penalties via soft power through other countries banking systems. This is why there is increasing pressure from countries like Russia and China to find another reserve currency. But it is bad for the US economy to be the reserve currency. Think about manufacturing. If your currency goes through inflation, then your exports cheapen relative to other markets. This is why the Chinese government tries to peg the Renminbi at a little over 8 yuan to the USD. Thus they can Incentivize manufacturing to move to their county. The US cannot play the same game - because it is the denominator for other countries financial systems, it is guaranteed to be on the losing side of the equation every time. Thus despite its strong post-war economy, manufacturing was always doomed to leave, which has introduced instability in the US political system. Allowing the USD to inflate (as all fiats want to do) relative to a global currency would incentivize manufacturing to return. Or, at minimum, stem the bleeding. That said, there would be significant disruption from the higher deficits the US has run for decades. Crypto As The Global Reserve For a global reserve currency, the following conditions must be met (there are others, but this is the minimum):
Must remain stable (I can hear the eyes rolling, but hang in with me here)
(politically) Must convince other nations that it is at greater risk of deflation than inflation (e.g. value more likely to go up than down over the long term).
(politically) Must have a secure transaction system that cannot be manipulated to benefit one country over another (e.g. satisfy concerns of China, Russia, and others).
Crypto, despite its short life, is capable of achieving these. The system designed by Satoshi and adopted by others is as strongly counter-inflationary as possible. From the viewpoint of a global reserve currency, this structurally removes the need for a body like the US federal reserve. The deflation side of the coin would potentially convince the US government to let go of its global financial role for the sake of economic growth. The big negatives of using crypto as a global reserve are its current volatility and its slow transaction times. The latter is a technological problem that can be solved either by speeding up times or guaranteeing value at time of transaction. The first I suspect may be a self-fulfilling prophecy. Once a currency is the global reserve denominating debts, confidence would follow out of political and financial necessity. Power resides where people think power resides. This would be a long term road for Crypto if it continues for the next two decades. Ideally; a slowly deflating world reserve would provide inflationary benefits to all counties. It would also potentially stabilize fiat currencies barring government manipulation. But in that case, government manipulation would be more obvious and less an us-vs-them scenario given the current financial system. Any such transition, should it happen, would taken one of two form. Either a) a significant economic crisis forces the US to accept a shock on its high deficits or b) the transition to crypto occurs slowly enough over decades to allow a battleship-style course realignment. The biggest obstacle I see to crypto is climate change. Most countries take it very seriously (imho, as they should), and crypto has a high energy cost, thus a high carbon cost. Most countries are bound by diplomatic and treaty agreements to hit certain targets. A crypto system would need to resolve this to have a chance at being the global reserve. Or, renewable energy infrastructure would be built fast enough so that a given crypto is at least carbon neutral. Lastly, it is possible that this transition could happen after mining is no longer profitable. If Bitcoin, for example, exists in 2050 and is still undergoing slow deflation while block rewards are infinitesimally small, it may behave in ways that satisfy concerns about stability. tl;dr: Structural deflation in crypto could satisfy political and economic needs for a global reserve currency in a multi-polar world.
A hybrid crypto exchange is a platform that provides users with access to their private keys and aims to solve the scalability issues of decentralized exchanges. *Disclaimer: I don’t insist that one have to store 100% of the portfolio on any kind of exchange. Why is it called Hybrid exchange? Hybrid crypto exchanges combine the pros of Centralized crypto exchanges and Decentralized crypto exchanges. The hybrid concept allows for certain cons to be remedied by implementing the advantages of the opposite. What are Centralized and Decentralized exchanges? Centralized(CEX) crypto exchanges provide massive volatility with the help of market-making activities. Occasional fiat gateways for its users, so everyone could quickly cash out gainings. Besides, substantial centralized crypto exchanges have a higher trust score within the community. Decentralized(DEX) crypto exchanges provide a solution to the security issues by letting users be in control of their private keys. This feature is a part of the real decentralization of trust philosophy, which is essential for the whole crypto economy. DEX vs CEX
Decentralized nature - in contrast to CEX, mostly DEXes are hosted on decentralized servers. This method of hosting makes them almost invulnerable to hacks;
Not restricted by law- because of its decentralized nature. There is no so-called single point of failure. It is nearly impossible to shut one down or regulate it. This is a strong point for users who live in countries that ban cryptocurrencies. But it’s really hard to find the independent Decentralized exchange. For example, IDEX which labels itself as DEX is a custodial exchange and is now sort of putting accounts and KYC into place. KYC is required for withdrawals of greater than 5,000$
Privacy - most CEXes requires users to go through a KYC process, which requires one to upload an ID. Without KYC procedure user can’t withdraw his funds. Unlike CEXes, DEXes requires an email address and nothing more, you even can think up a custom identity for it;
User responsibility - CEXes store all funds located on their platform on custody wallets which can potentially be a vulnerable target for hackers. However, DEXes allow users to be in full control over their funds. All that is needed to access a DEX is for a user to connect his wallet based on some mechanic (private key, metamask, json). This is the true nature of decentralization, blockchain is supposed to cut off third parties that collect fees for holding your funds.
On the one hand, DEX’s provide higher security and privacy for its users, but those aren't the only things we are looking for. On the other hand, CEX’s, as I told earlier, have a higher trust score, so what does this mean exactly?
Resources - currently CEX’s have more resources. Hence they can deliver a better user experience for its users. CEX’s are generally much more popular than DEXes. Though, DEXes are still an option B, and frequently used by those who do not trust the management of centralized exchanges due to human factors such as breach of internal controls and fraud..
But is their royalty deserved? “I definitely hope centralized exchanges go burn in hell as much as possible,” Vitalik Buterin stated in 2018. In particular, he thinks there’s no reason some projects need to pay $10 to $15 million(as per 2018) in listing fees to let people trade their tokens on centralized exchanges. This feels like a blood diamonds issue in the diamond industry. Most of those platforms were built on lies, some of them are currently building themselves out on falsehoods.
Ownership transparency - DEX’s were created to avoid regulatory pressure. Thus DEX founders' prefer to remain anonymous. Of course, this doesn't contradict decentralization, but users always have to remain skeptical when it comes to their funds.
CEXs have to be regulatory compliant, it’s impossible to be obedient without registering a company, submitting documents for proof of identity, etc. Most of the legal registries are opened to the public. Hence the founders are publicly known individuals. Besides, there is no need to hide while you are compliant and not involved in illegal activities.
Due diligence - Large CEX’s always do research on projects prior to listing, or even hosting an IEO for them. This leads to vast FOMO, users don't hesitate to do their own research and line up to for an investment opportunity. Currently, Binance is the most prosperous platform regarding IEO investments. DEXes dont host IEOs due to their decentralized nature and user anonymity. Usually, if one wants to participate in an IEO, a KYC process is required.
Easy to use - DEX’s frequently have convoluted interfaces, which is one of the considerable bottlenecks for new investors. In contrast, CEX’s are built for relative ease of use by experienced traders and newbies.
If you are new to this industry, or do not want to understand the intricacies of blockchains and came here to trade Bitcoin, I advise you to use a CEX. But If you came here for the tech, you will enjoy reading this more. What is the hybrid crypto exchange approach? Not so long ago, I decided to dive into the topic of hybrid exchanges as a potential game-changer in the cryptocurrency industry. The hybrid exchange philosophy builds on the strengths of decentralized and centralized exchanges. During my research, I came across a curious example - NEXT.exchange To further simplify the process of understanding the principles of hybrid exchanges, I propose to consider this topic by case. It’s worth noting that there is much to contemplate in regards to hybrid exchange platforms, their solutions and approaches may vary. There are also not many out there. DEX pros within NEXT:
Transparency - Unlike DEX’s that use decentralized or cloud servers, NEXT.exchange will use its own blockchain - NEXT.chain, based on SYS, DASH, and BTC, which in turn will allow the platform to expand on its transaction throughout (occasionally DEX’s majority of which are ETH based, experience hang time when the Ethereum network is overloaded with transactions).
Essentially NEXT.chain will be used by the exchange as an open database that stores information about all transactions and tokenized assets (assets created on NEXT.chain are dubbed 00X standard) within the exchange. To maintain the blockchain, investors will deploy 100 master nodes during the first year (79 out of 100 are already functioning).
Hybrid mining POW/POS - Each successfully executed order will be a transaction for mining. An interesting fact is that the issue of the exchange token will be carried out by mining, in a similar way to how it happens on the bitcoin network. Master nodes & miners will receive rewards for their contribution to the ecosystem.
Governance - the NEXT team is looking to provide Masternode operators with the opportunity to participate in the management of further development of the exchange and hybrid ecosystem by means of voting. How exactly this feature will be implemented remains a mystery, but sounds fair.
User confidence - the team plans on providing users with access to their wallet private keys. Additionally, they aim to involve an escrow services (similar to Kucoin) on their platform. Below is a brief schematic of their system and how NEXT.chain will factor in. Seems the goal is to tokenize assets using their chain, similar to Binance.
Privacy - Traders will be able to trade crypto-crypto without going through the KYC procedure, which is great for users. But the regulatory landscape may change over time. KYC will be needed for anything involving fiat.
CEX pros within NEXT:
Ownership transparency - Legal entity is registered in the Netherlands. All information about the team is publicly available on their site and on linkedin.
Fiat gateway - Presence of a legal entity allows the exchange to enable its users to withdraw their crypto assets to fiat and to trade several cryptocurrencies against fiat.
However, to do this, users will have to go through KYC (Yes, the guys from NEXT have some workings with banks to provide their users with access to USD and EUR. Other currencies will probably be available later). Thus, traders will be able to withdraw funds directly to Bank cards. As far as I am aware, they also plan to make PayPal available for withdrawals only.
High-quality community support - When I found myself in their community, I was surprised by the quality of support, I have not seen this even in TIER-1 exchanges. The team members eagerly answered all my questions. And the people in the chat were wonderful and kind.
It’s important to note that NEXT is just at its start, and will be releasing a huge update dubbed 2.0 (after a testing period with its community), so if hybrid cryptocurrency exchanges are interesting to you - then this is definitely one to keep an eye out for. Summing up Recently, the industry of centralized crypto-exchanges is literally filled with scammers. Teams of second-rate centralized exchanges "draw" trading volumes and even IEO results. Unfortunately, many blindly believe them. This is going to be a massive problem in the future, more important than you can imagine. Those scam exchanges will become more prominent and will swindle more people, this will lead to a severe outflow of defrauded people from the industry, which can not afford it. Hybrid cryptocurrency exchanges are a new trend that I think can improve the whole industry. Not all hybrid exchanges have their own blockchain, NEXT was considered as the project most suitable for the description of a hybrid cryptocurrency exchange. Don't FOMO and don't hesitate to do your own researches before depositing funds on the exchange wallets or participating in an IEO.
NOTE: Not sure if this is useful at all. I welcome corrections. This was off the top of my head, probably a lot of stuff can be made clearer. I see many people here are not really understanding why bitcoin was created. As a result, many are unable to answer these questions:
Why bitcoin over another crypo-currency?
If bitcoin is slower than CC why use it?
If you can answer "Why was Bitcoin created?" you will automatically form your own opinion on the questions above! Wrong Question The original question we asked is kind of the wrong question to ask. It has a simple (unsatisfying) answer: Question: Why was Bitcoin created? Answer: To prevent spending the same digital dollar twice. Wait.. what? Before we understand above, let's first understand the problem with digital money... Money: physical vs. digital Physical money is easy. Let's say we decide to use apples as currency. If I have one apple and you have one apple, and I give you one apple, than you now have two apples and I have none. Digital money is hard. Let's say we decide to use cat pictures as currency. If I have a picture of a cat named "sparkles.jpeg" and you have a picture of a cat named "rocket.jpeg", and I send you "sparkles.jpeg" - then you now have two pictures of a cat, but I still have one! Similarly, if we were to represent digital dollars as information (file, record in a database or photo of a dollar), then anytime we send a dollar, we effectively create a copy of it. Why is this a problem? Double Spending Suppose I have only $1 digital dollar on my hard-drive (doesn't matter how it is stored - it can be a file called "Wallet.txt" with a single entry "Me = 1"). Let's say there are two online stores: Tables.com and Chairs.com. Tables.com sells tables online. Chairs.com sells chairs online. The prices are as follows:
Tables are $1 digital dollars each
Chairs are $0.5 digital dollars each
I am now going to buy 1 table and 2 chairs (total cost $2) for only $1 dollar. Here is how I can do this:
First, I will create a copy of my wallet (where my digital dollars are stored). Let's called it "Wallet.txt.backup"
Then, I will send $1 digital dollars to Tables.com store and ask them to ship me 1 Table.
After my order is accepted, I will immediately immediately restore my "Wallet.txt.backup" file (which still has $1 dollars in it) and...
Send $1 digital dollars to Chairs.com and order 2 chairs.
Since Chairs.com doesn't know about Tables.com (they don't have direct communication channel), they will both ship me the goods. I have now spent the same dollar twice. I have double spent my dollar. Banks solve Double Spending There is a very simple (and elegant) solution to this problem. Instead of letting everyone keep track of their own Wallet.txt file, let one person do it and send all transactions through them. Let's say that now we have to send every transaction through Mr. Knab. So if I want to pay Chairs.com I don't send the digital dollar to the store directly, but instead I send my digital dollar to Mr. Knab and ask him to forward my digital dollar to Chairs.com Let's see how this prevents spending the same dollar twice:
Mr. Knab knows that I have $1 digital dollar to my name. He stores it in a file called "Wallet.txt".
I ask Mr. Knab to send $1 digital dollar to Tables.com store to order 1 Table.
Mr. Knab subtracts $1 from me in "Wallet.txt" and adds it to the line that corresponds to Tables.com (how he does this is irrelevant - the important thing is that he remembers how many digital dollars I have)
Mr. Knab sends an email to Tables.com saying "You got $1 digital dollar, please ship a Table to this guy".
(Now comes me trying to cheat) After my order is accepted, I immediately ask Mr. Knab to send $1 digital dollar to Chairs.com to order 2 chairs.
Mr. Knab checks "Wallet.txt" and sees that I have $0 digital dollars remaining and rejects my order.
I could not spend the same digital dollar twice. In the real world "Mr. Knab" is the bank. It is an institution that stores your digital wallet to make sure you can't cheat. Bank is a tool to prevent double spending. The Right Question Now that we understand the challenge with digital money (making sure you don't spend a digital dollar twice) and how the bank solves this (by storing your digital wallet for you) we can ask the proper question: Question: Why was Bitcoin created to prevent spending the same digital dollar twice if the bank already does it? Answer: Bitcoin prevents spending the same digital dollar twice without a bank. Let us reiterate this point: Bitcoin was created to prevent spending the same digital dollar twice without a bank. Useful or Not? Whether this property (preventing double spending without intermediaries) is a useful thing is not what we are concerned with here. Think of bitcoin as solving a challenge: hey, we can prevent double spending with a bank in between, can we do this without a bank? We leave the question whether Bitcoin is "useful" to others. How Bitcoin solves this problem (Short version) Bitcoin network chooses a random computer to briefly act as a bank. That computer then makes sure no dollar is spent twice. Randomly choosing computer is hard and Bitcoin solves this problem by requiring proof of work, the first to provide it will get chosen as the bank. Being chosen as a bank pays (block reward) and everyone wants to provide proof of work first. The more people compete the harder it becomes to be the bank. The harder it is to become the bank, the more secure the Bitcoin is.
How Bitcoin solves this problem (long version)
I lied. Bitcoin still has a bank. Only this bank is one of the people who participates in Bitcoin network: let's call them a person-bank. This person-bank is chosen randomly for EVERY transaction (*gross simplification*). The person-bank is responsible for verifying that the transaction is correct. Since Bitcoin network sends a copy of the Wallet.txt file to EVERY person, anyone can verify any transaction. If the person-bank verifies transaction correctly - it gets paid. Otherwise it gets nothing. Picking random person is hard The problem then becomes how to pick a person-bank randomly, so that you can't always have Joe being the person-bank and spending his own dollars twice. Turns out the problem if picking a random person from a group of people is really hard to do in practice. Bitcoin solves this problem by posing a puzzle to each person - and the first person to come up with an answer gets to act as a person-bank for the next transaction. This puzzle must be so hard, that nobody should be able to do any better on it than anybody else. It's hard to think of this in human terms, because with practice we get better at everything. However, imagine that everyone in the world got REALLY REALLY drunk and was forced to throw darts. So that no matter how much practice anyone had with darts, everyone was equally horrible. Every time anyone threw a dart it would always land randomly. Now, picking a random person is easy - pick the person who threw the dart into the middle of the board. In Bitcoin this puzzle involves hashing and the answer to it is called proof of work. But this is all really irrelevant. What is important is that no computer can practice to get better at solving this puzzle. They are all equally drunk when it comes to the solution. All the bitcoin computers who are trying to solve the puzzle are called miners. The winning participant gets a lot of money as a reward: currently 12.5BTC. Security depends on puzzle complexity If the puzzle is too easy, then someone can always solve it first (by buying a bigger computer) and approve their own invalid transaction. Bitcoin increases the difficulty of the puzzle if it takes the network less than 10 minutes to solve it. It decreases the difficulty if it takes more than 10 minutes to solve it. If there are 1 person trying to solve a puzzle and another joins, then the difficulty will increase by two. This is because 1 person solved the puzzle every 10 minutes, so if another joins, they will solve it twice as fast (think two drunken people throwing darts instead of one - it will take half the time to hit the center). If we have 100,000 people trying to solve a puzzle and another person joins, this will barely affect the difficulty. Alternatively, if we wanted to beat 100,000 and solve the puzzle first, we would need as much computation power as all those people combined (and a little bit more). We would need about 51% of the power of the whole bitcoin mining network. That is why for Bitcoin to be secure, the puzzle must be hard for anyone on the planet EARTH to solve. If bitcoin was only mined by one country, then another country could easily purchase enough computers (say 10x as many) to make sure they act as the bank every time. They could then spend the same dollar twice (for example, they could buy some tanks from another country, but then revert the money back to their wallet).
arriving at consensus AND distributing coins via burning Bitcoin instead of electricity/equipment to create permissionless, unfakeable, green, and trust minimized basis over every aspect of sidechain control.
creating Bitcoin peg from altcoin chain to mainchain (the hard direction) by allocating small percentage of Bitcoin intended for burning to reimbursing withdrawals, effectively making it a childchain/sidechain (no oracles or federated multisigs)
This is not an altcoin thread. I'm not making anything. The design discussed options for existing altcoins and new ways to built on top of Bitcoin inheriting some of its security guarantees. 2 parts: First, the design allows any altcoins to switch to securing themselves via Bitcoin instead of their own PoW or PoS with significant benefits to both altcoins and Bitcoin (and environment lol). Second, I explain how to create Bitcoin-pegged assets to turn altcoins into a Bitcoin sidechain equivalent. Let me know if this is of interest or if it exists, feel free to use or do anything with this, hopefully I can help.
how to create continuous sunk costs, permissionless entry, high cost of attacks?
how to do it without needing to build up a new source of hardware capital or energy costs?
how to peg another chain's token value w/o incentivized collusion risk of federation or oracles?
how to make sidechain use fully optional for all Bitcoin parties?
how to allow programmable Bitcoins w/ unlimited permissionless expressiveness w/o forcing mainchain into additional risks?
Solution to first few points:
Continuous Proof of Bitcoin Burn (CPoBB) to distribute supply control and sidechain consensus control to independent parties
Distributes an altcoin for permissionless access and sidechain-only sybil protection.
In case of sidechain block-producer censorship, Bitcoin's independent data availability makes sidechain nodes trivially aware
PoW altcoin switching to CPoBB would trade:
cost of capital and energy -> cost of burnt bitcoin
finality of their PoW -> finality of Bitcoin's PoW
impact on environment -> 0 impact on environment
unforgeable costliness of work -> unforgeable costliness of burn
contract logic can include conditions dependent on real Bitcoins as it's Bitcoin-aware
PoS altcoin switching to CPoBB would trade:
permissioned by coin holders entry -> permissionless entry by anyone with access to Bitcoin
no incentive to give up control or sell coins -> incentive to sell coins to cover the cost of burnt bitcoin
incentivized guaranteed centralization of control over time by staking -> PoW guarantees with same 0 environmental impact
nothing at stake -> recovering sunk costs at stake
contract logic can include conditions dependent on real Bitcoins as it's Bitcoin-aware
We already have a permissionless, compact, public, high-cost-backed finality base layer to build on top - Bitcoin! It will handle sorting, data availability, finality, and has something of value to use instead of capital or energy that's outside the sidechain - the Bitcoin coins. The sunk costs of PoW can be simulated by burning Bitcoin, similar to concept known as Proof of Burn where Bitcoin are sent to unspendable address. Unlike ICO's, no contributors can take out the Bitcoins and get rewards for free. Unlike PoS, entry into supply lies outside the alt-chain and thus doesn't depend on permission of alt-chain stake-coin holders. It's hard to find a more bandwidth or state size protective blockchain to use other than Bitcoin as well so altcoins can be Bitcoin-aware at little marginal difficulty - 10 years of history fully validates in under a day.
What are typical issues with Proof of Burn?
limited burn time window prevents permissionless entry in the future. how many years did it take for most heavily mined projects to become known and well reviewed? many. thus entry into control of supply that's vital to control of chain cannot be dependent on the earliest stage of the project. (counterparty)
"land grabs" - by having limited supply without continuous emission or inflation we encourage holding vs spending.
These issues can be fixed by having Proof of Burn be permanently accessible and continuous: Continuous Proof of Bitcoin Burn CPoBB
This should be required for any design for it to stay permissionless. Optional is constant fixed emission rate for altcoins not trying to be money if goal is to maximize accessibility. Since it's not depending on brand new PoW for security, they don't have to depend on massive early rewards giving disproportionate fraction of supply at earliest stage either. If 10 coins are created every block, after n blocks, at rate of 10 coins per block, % emission per block is = (100/n)%, an always decreasing number. Sidechain coin doesn't need to be scarce money, and could maximize distribution of control by encouraging further distribution. If no burners exist in a block, altcoin block reward is simply added to next block reward making emission predictable. Sidechain block content should be committed in burn transaction via a root of the merkle tree of its transactions. Sidechain state will depend on Bitcoin for finality and block time between commitment broadcasts. However, the throughput can be of any size per block, unlimited number of such sidechains can exist with their own rules and validation costs are handled only by nodes that choose to be aware of a specific sidechain by running its consensus compatible software. Important design decision is how can protocol determine the "true" side-block and how to distribute incentives. Simplest solution is to always :
Agree on the valid sidechain block matching the merkle root commitment for the largest amount of Bitcoin burnt, earliest inclusion in the bitcoin block as the tie breaker
Distribute block reward during the next side-block proportional to current amounts burnt
Bitcoin fee market serves as deterrent for spam submissions of blocks to validate
sidechain block reward is set always at 10 altcoins per block Bitcoin block contains the following content embedded and part of its transactions: tx11: burns 0.01 BTC & OP_RETURN tx56: burns 0.05 BTC & OP_RETURN ... <...root of valid sidechain block version 1> ... tx78: burns 1 BTC & OP_RETURN ... <...root of valid sidechain block version 2> ... tx124: burns 0.2 BTC & OP_RETURN ... <...root of INVALID sidechain block version 3> ...
Validity is deterministic by rules in client side node software (e.g. signature validation) so all nodes can independently see version 3 is invalid and thus burner of tx124 gets no reward allocated. The largest valid burn is from tx78 so version 2 is used for the blockchain in sidechain. The total valid burn is 1.06 BTC, so 10 altcoins to be distributed in the next block are 0.094, 0.472, 9.434 to owners of first 3 transactions, respectively. Censorship attack would require continuous costs in Bitcoin on the attacker and can be waited out. Censorship would also be limited to on-sidechain specific transactions as emission distribution to others CPoB contributors wouldn't be affected as blocks without matching coin distributions on sidechain wouldn't be valid. Additionally, sidechains can allow a limited number of sidechain transactions to happen via embedding transaction data inside Bitcoin transactions (e.g. OP_RETURN) as a way to use Bitcoin for data availability layer in case sidechain transactions are being censored on their network. Since all sidechain nodes are Bitcoin aware, it would be trivial to include. Sidechain blocks cannot be reverted without reverting Bitcoin blocks or hard forking the protocol used to derive sidechain state. If protocol is forked, the value of sidechain coins on each fork of sidechain state becomes important but Proof of Burn natively guarantees trust minimized and permissionless distribution of the coins, something inferior methods like obscure early distributions, trusted pre-mines, and trusted ICO's cannot do. More bitcoins being burnt is parallel to more hash rate entering PoW, with each miner or burner getting smaller amount of altcoins on average making it unprofitable to burn or mine and forcing some to exit. At equilibrium costs of equipment and electricity approaches value gained from selling coins just as at equilibrium costs of burnt coins approaches value of altcoins rewarded. In both cases it incentivizes further distribution to markets to cover the costs making burners and miners dependent on users via markets. In both cases it's also possible to mine without permission and mine at a loss temporarily to gain some altcoins without permission if you want to. Altcoins benefit by inheriting many of bitcoin security guarantees, bitcoin parties have to do nothing if they don't want to, but will see their coins grow more scarce through burning. The contributions to the fee market will contribute to higher Bitcoin miner rewards even after block reward is gone.
What is the ideal goal of the sidechains? Ideally to have a token that has the bi-directionally pegged value to Bitcoin and tradeable ~1:1 for Bitcoin that gives Bitcoin users an option of a different rule set without compromising the base chain nor forcing base chain participants to do anything different. Issues with value pegs:
federation based pegs allow collusion to steal bitcoins stored in multi-party controlled accounts
even if multisig participants are switched or weighted in some trust minimized manner, there's always incentive to collude and steal more
smart contract pegs (plasma, rollups) on base chain would require bitcoin nodes and miners to validate sidechain transactions and has to provide block content for availability (e.g. call data in rollups), making them not optional.
bitcoin nodes shouldn't be sidechain aware so impossible to peg the value
Let's get rid of the idea of needing Bitcoin collateral to back pegged coins 1:1 as that's never secure, independent, or scalable at same security level. As drive-chain design suggested the peg doesn't have to be fast, can take months, just needs to exist so other methods can be used to speed it up like atomic swaps by volunteers taking on the risk for a fee. In continuous proof of burn we have another source of Bitcoins, the burnt Bitcoins. Sidechain protocols can require some minor percentage (e.g. 20%) of burner tx value coins via another output to go to reimburse those withdrawing side-Bitcoins to Bitcoin chain until they are filled. If withdrawal queue is empty that % is burnt instead. Selection of who receives reimbursement is deterministic per burner. Percentage must be kept small as it's assumed it's possible to get up to that much discount on altcoin emissions. Let's use a really simple example case where each burner pays 20% of burner tx amount to cover withdrawal in exact order requested with no attempts at other matching, capped at half amount requested per payout. Example:
withdrawal queue: request1: 0.2 sBTC request2: 1.0 sBTC request3: 0.5 sBTC same block burners: tx burns 0.8 BTC, 0.1 BTC is sent to request1, 0.1 BTC is sent to request2 tx burns 0.4 BTC, 0.1 BTC is sent to request1 tx burns 0.08 BTC, 0.02 BTC is sent to request 1 tx burns 1.2 BTC, 0.1 BTC is sent to request1, 0.2 BTC is sent to request2 withdrawal queue: request1: filled with 0.32 BTC instead of 0.2 sBTC, removed from queue request2: partially-filled with 0.3 BTC out of 1.0 sBTC, 0.7 BTC remaining for next queue request3: still 0.5 sBTC
Withdrawal requests can either take long time to get to filled due to cap per burn or get overfilled as seen in "request1" example, hard to predict. Overfilling is not a big deal since we're not dealing with a finite source. The risk a user that chooses to use the sidechain pegged coin takes on is based on the rate at which they can expect to get paid based on value of altcoin emission that generally matches Bitcoin burn rate. If sidechain loses interest and nobody is burning enough bitcoin, the funds might be lost so the scale of risk has to be measured. If Bitcoins burnt per day is 0.5 BTC total and you hope to deposit or withdraw 5000 BTC, it might take a long time or never happen to withdraw it. But for amounts comparable or under 0.5 BTC/day average burnt with 5 side-BTC on sidechain outstanding total the risks are more reasonable. Deposits onto the sidechain are far easier - by burning Bitcoin in a separate known unspendable deposit address for that sidechain and sidechain protocol issuing matching amount of side-Bitcoin. Withdrawn bitcoins are treated as burnt bitcoins for sake of dividing block rewards as long as they followed the deterministic rules for their burn to count as valid and percentage used for withdrawals is kept small to avoid approaching free altcoin emissions by paying for your own withdrawals and ensuring significant unforgeable losses. Ideally more matching is used so large withdrawals don't completely block everyone else and small withdrawals don't completely block large withdrawals. Better methods should deterministically randomize assigned withdrawals via previous Bitcoin block hash, prioritized by request time (earliest arrivals should get paid earlier), and amount of peg outstanding vs burn amount (smaller burns should prioritize smaller outstanding balances). Fee market on bitcoin discourages doing withdrawals of too small amounts and encourages batching by burners. The second method is less reliable but already known that uses over-collateralized loans that create a oracle-pegged token that can be pegged to the bitcoin value. It was already used by its inventors in 2014 on bitshares (e.g. bitCNY, bitUSD, bitBTC) and similarly by MakerDAO in 2018. The upside is a trust minimized distribution of CPoB coins can be used to distribute trust over selection of price feed oracles far better than pre-mined single trusted party based distributions used in MakerDAO (100% pre-mined) and to a bit lesser degree on bitshares (~50% mined, ~50% premined before dpos). The downside is 2 fold: first the supply of BTC pegged coin would depend on people opening an equivalent of a leveraged long position on the altcoin/BTC pair, which is hard to convince people to do as seen by very poor liquidity of bitBTC in the past. Second downside is oracles can still collude to mess with price feeds, and while their influence might be limited via capped price changes per unit time and might compromise their continuous revenue stream from fees, the leverage benefits might outweight the losses. The use of continous proof of burn to peg withdrawals is superior method as it is simply a minor byproduct of "mining" for altcoins and doesn't depend on traders positions. At the moment I'm not aware of any market-pegged coins on trust minimized platforms or implemented in trust minimized way (e.g. premined mkr on premined eth = 2 sets of trusted third parties each of which with full control over the design). _______________________________________
Brief issues with current altchains options:
PoW: New PoW altcoins suffer high risk of attacks. Additional PoW chains require high energy and capital costs to create permissionless entry and trust minimized miners that are forever dependent on markets to hold them accountable. Using same algorithm or equipment as another chain or merge-mining puts you at a disadvantage by allowing some miners to attack and still cover sunk costs on another chain. Using a different algorithm/equipment requires building up the value of sunk costs to protect against attacks with significant energy and capital costs. Drive-chains also require miners to allow it by having to be sidechain aware and thus incur additional costs on them and validating nodes if the sidechain rewards are of value and importance.
PoS: PoS is permissioned (requires permission from internal party to use network or contribute to consensus on permitted scale), allows perpetual control without accountability to others, and incentivizes centralization of control over time. Without continuous source of sunk costs there's no reason to give up control. By having consensus entirely dependent on internal state network, unlike PoW but like private databases, cannot guarantee independent permissionless entry and thus cannot claim trust minimization. Has no built in distribution methods so depends on safe start (snapshot of trust minimized distributions or PoW period) followed by losing that on switch to PoS or starting off dependent on a single trusted party such as case in all significant pre-mines and ICO's.
Proof of Capacity: PoC is just shifting costs further to capital over PoW to achieve same guarantees.
PoW/PoS: Still require additional PoW chain creation. Strong dependence on PoS can render PoW irrelevant and thus inherit the worst properties of both protocols.
Tokens inherit all trust dependencies of parent blockchain and thus depend on the above.
Embedded consensus (counterparty, veriblock?, omni): Lacks mechanism for distribution, requires all tx data to be inside scarce Bitcoin block space so high cost to users instead of compensated miners. If you want to build a very expressive scripting language, might very hard & expensive to fit into Bitcoin tx vs CPoBB external content of unlimited size in a committed hash. Same as CPoBB is Bitcoin-aware so can respond to Bitcoin being sent but without source of Bitcoins like burning no way to do any trust minimized Bitcoin-pegs it can control fully.
Few extra notes from my talks with people:
fees must be high to be included in next block (and helps pay and bribe bitcoin miners), RBF use is encouraged to cancel late transactions
what if not enough burners, just passive nodes? you can burn smallest amount of bitcoin yourself when you have a transaction you want to go through
using commit hashes on bitcoin to lock altcoin state isn't new (e.g. kmd) but usually those rely on some federation or permissioned proof of stake mechanism with no real costs. this is combination of both.
this is not exactly like counterparty's embedded consensus as block data and transactions are outside Bitcoin, but consensus is derived with help of embedded on Bitcoin data.
deterministic randomness (e.g. via that block's hash) could be used to assign winning sidechain block weighted by amount burned to allow occasional blocks formed by others curbing success rate of censorship by highest burner
wants to transition away from using proof of burn via tunable proofs and native proof of work (whitepaper)
a dominant premine (trust maximized) relative to emission that defeats the purpose of distributing control over incentives (figure 3 in tokenpaper suggests premine still ~30%-70% by year 2050)
variable emission rate "adaptive mint and burn" makes supply unpredictable (and possibly gameable)
additional rewards that aren't trust minimized like "app mining" and "user incentives" possibly gameable with premine
election of a leader includes their own PoW to be elected even at start (5% cap), why lol?
blockstack also suggested use of randomness that depends on that block so Bitcoin miners that already spent energy mining that block can't just re-do it to get picked at no cost
if can burn bitcoins directly via op_return tx would help to use 1 less output and be provably prunable for utxo set (not sure if that's relayed as standard)
Main questions to you:
why not? (other than blocktime)
can this be done without an altcoin? (Not sure and don't think so w/o compromising unforgeable costliness and thus trust minimization. At least it's not using an altcoin that's clearly centralized.)
how to make it less detectable by Bitcoin miners? ( BMM could use some techniques described here: https://twitter.com/SomsenRuben/status/1210040270328254464 ) ( Perhaps since sidechain nodes receive proposed blocks independently and can figure out their hash, the commit message ( sidechain id + block commit + miner address) can be hashed one more time before its placed on Bitcoin, making miners unaware until after Bitcoin block is found that this is that sidechain's burn. Sidechain block producers would have to delay sidechain block propagation until after Bitcoin block is propagated, 10 minutes blocktime helps here. Hiding the fact that Bitcoin is burnt until after the fact is another possibly important matter. )
Should reward be split between all valid blocks or just winner gets all? (Blockstacks approach does not reward blocks marked by different from leader chaintip. That seems dangerous since sidechain tx sorting would be difficult to match and could take significant time to be compensated for perfectly valid work and coins burned. It doesn't seem as necessary in burning since we're not expending costs based on only one previous block version, the costs are independent of block assembly. Tradeoff is between making it easier for independent "mining" of sidechain and making it easier to validate for full nodes on sidechain)
I admit this reads a bit as a fiction but the ideas I am sketching below seem so clear to me that as I work out the intricate warps and woofs I quickly cobbled together, I don’t expect the basic conclusion to be shown erroneous. So read it at your own risk. The rewards however as the words reveal are already (t)here. Perhaps I am bat shit crazy but I just don’t think so. The advances that blockchains avalanche have already started to flake off. Others just play tether ball around the tree that might snow the next 100 years of evolutionary theory. Joan Roughgarden has propounded an evolutionary theory of social selection to replace sexual selection and has advocated, advised, and added instances of her bottom up modeling procedure. This development in evolution studies, realizes objectively equal gender classifications formerly relegated and reduced to incidentally derived dimorphic status, latterly founding reproductions of natural selection through underdeterminations of offspring first rather than overdeterminations of parental investments and divestments. Her proposal met with profound disdain and dejection from those supposedly in the know. Blockchain technology appears to be evolving along the lines of a new algorithmically instantiated platform by AVALabs from increasingly familiar consensus protocols first sketched in 2018 by an invisible crew named Team Rocket. Roughgarden’s social selection as recognized and applied largely moved from and through animal species even-the-while plants remained in it’s rear view purview. A physical property that sports the model appears to be definitively recoverable from nature in the presumption of a potentially mutual cross gender pleasure via an unknown chemical mediator. Joan has suggested one such discoverable option but it turns out supplementally that by applying a version of the avalanche protocol towards achieving consensus within plant ecologies under social selection in analogy with human economies of blockchain at scale, new insights into empirically testable scenarios for evolutionary theory can be designed which obviates the need for a specific chemical in the sustainment of theoretical trajectories the model supports. There is a sustainable cross over through Nash’s idea of parallel machine control, his notion of a bargaining equilibrium, Roughgardian social selection, and programmatic avalanche metastability. I am only going to sketch — here and now — the communicabilities within. Suzanne Simard tested and proved that plants can send carbon through their roots to other trees. The relation of plants ( and animals) in this network of relations provided by communication of chemicals through the mycelium has been called perhaps flippantly and humoursly the Wood Wide Web but as I shall show below the manifestable narrow waist of the metabstability as designed by AVA Labs in its production engine provides an architecture which when applied to Rougarden’s use of game theory can oscillate theoretical plant sexuality ( big vs small gamete) within and between plants in such way that implies that plants have genders, a prediction that can be empirically confirmed. There is more to blockchain evolution than meets the atomic-swapping eye. I suspect that there will be more and more applications of the snow family of protocols to science just as there are increasing instantiations in the blockchain (AVAlabs, BCH, Perlin) space. The basic idea underlying social selection is that reproduction is not about the mating process temporally per say but rather is about cooperating to raise the most number of offspring. This cooperation may occur between parents without respect to sex but interestingly may also occur between species and subspecies. That is the contribution that blockchain technology provides to evolutionary theory. It is quite remarkable. Hermaphroditic trees may court each other by choosing not to revert to global competitive Nash selfish threat points but instead ‘opt-in’ to continue to choose cooperative joint bargaining and side payments strategically when a plant team fitness function is constructed by chemically agnostic (concentration gradient driven) transmission through a stable main mycelial network. Simard has shown that “mother trees” can direct carbon deferentially to their own offspring and thus as these parent individuals in some families may be either male or female both within and between the organisms themselves (multiple genders) it is possible for team work to arise ecologically ( in the space the distribution of trees on the ground landscapes) such that other species mother and father trees receive chemicals including carbon by differential inbreeding that draws other subspecific variants within the network being provisioned underground to their offspring by excluding non-familial relatives that have opted out of helping to raise offspring and decided to compete rather than cooperate and thus bifurcate in evolutionary time the genes fungi select when evolving the proximately extant networkable connections. If the parents use an avalanche like metastability format to distribute carbon through such a growing network ( sampling courted partners both within themselves and between individuals and adopting their carbon release kinematic) and the offspring have traits passed down by grown ancestors similar to begging in baby birds utilizing such, then trees using self-DNA ‘to pay’ (from the pay-off matrix operation in game theory ) ( which inhibits self growth and thus expands the places on the ground available for growth and reproduction) during the transmission, those so strategically cooperating can move up trophic levels the network builds out purely geographically. There is no group pleasure chemical involved in this model, instead only each individual’s DNA is incorporated which can be as narrow a margin as the heritable interpretation of that supramolecular chemical tolerates as a template biophysically. This will be explained in the sequel. That is the basic idea and thus while it make take some years before this idea is networked out, the basic idea is available for those who look beyond the negatively competitive aspects of oikos information and towards the cooperation we all need both as a species and as a humanity with others. Unfortunately for our better-selves, there has been a value judgement marshaled against at least some of those sold on bitcoin among us. Commentators have challenged up-coming POS governed blockchains as being too complex and that when making a guess at where to place one’s $R&D, the promoted projection has been into POW tech not because it might be inherently a better platform to launch a distributed ledger in, but because the threshold to user adoption appears to them as literally a no-brainer. Some have made the bet that it is easier to develop POW functions etc. than POS ones, since one does not have to assume any cognitive interest in the user- validator beyond the required instructions ( 1 — plug in computer, 2 — go hash). While Kevin Sekniqi of AVALabs has said he has no universal composable theorem/argument of POS and POW, he has made the point on multiple times that POW networks can be embedded into POS systems. This means to me that any value judgement being applied against POS support equally applies to POW manifestations (when the entire universe of future design possibilities is included in reflection on those interests that regulate the decision of how to constitute the afforded applications). Now Microsoft has recently published a patent to use body activity as proof-of-work, saying that this will help reduce energy expenditures. Microsoft is trying to patent in on the decision bitcoiners made, that it has value— that they have been convinced of the bitcoin narrative and gone the last mile to adopt it as something they choose to do and be a part of. The POW operation proposed in the Microsoft patent potentially includes “ a brain wave or body heat emitted from the user when the user performs the task provided by an information or service provider, such as viewing advertisement or using certain internet services, can be used in the mining process.” while it is determining if work was done. We do not need these companies using our interest and decisions in agreeing to a narrative of what money, whether ideal or not is, to force and coerce our behavior based on a prior knowledge about our ideas, decisions and preferences we may have expanded on socially and communicated with others publicly. Microsoft may think this is not what they are doing but the application is clear in the example of the musicians who have already had their brain waves used to select notes. It is the artist when thinking of the note to be needed creatively that produces the wave the machine records, it is not the machine that creates the image the the user’s brain produces a wave thereof. We do not need new tech companies or new tech products deciding how we use and view social media, we need them to build tech that reflects how we like to use it, how we are pleased to use it independently of how some sovereign wishes it to be regardless of how free, how much money they have or are. If they had such a device then it seems that sooner than later some will start to create advertisements that manipulate not only our pleasures and pains but also our understandings. This would be much worse than bad. It is something I would resist. Humanity made clear the distinction between the physical actions of organic bodies and bodies made of physically active materials a few hundred years ago and yet the Microsoft patent in the name of creating something new slashes and hashes right through this distinction as if it was nothing but a virtual simulation of the large scale data synthesized from a prior analysis. Seems to me that this kind of POW centric thinking and planning on control over our user interaction with machines is just not the way to go into Web3.0. With Web 3 we will, among many other things accumulate smart assets and we will need a way to sort and use our own personal portfolio of them especially if one obtains them through non-fungible tokens. The production, wilding, collection, and reuse of these valuable digitizations is going to be a increasingly demanded functionality on Web 3. With AVA these powerful processes individuated by different businesses will thus have a programmed utility under an action — reaction horizon of superfluid network changeabilities previously invisible to intelligent creators but ones we can understand. The details of such a lightweight scalable tech remains for me to provide to you but it is clear the motivation behind the Microsoft patent is not sound. I hope to show that one on the AVA network is. Here is quick guide to my idea: It is possible to produce a body activity proof-of-work such that there is absolutely no forced cognitive decision making that is required of the user. One does not have to force/coerce the user into making new and additional cognition than those already being done. Sounds like I am saying you can eat your cake having haved it too. But in fact the example I am suggesting is one in which the user simply adapts to technology rather than adopts it and this can be done with a body activity POW aspect within and POS horizon. In the case of using a hand gyro for digital asset search and retrieval ( it rotates in two independent degrees of freedom that provide manual overrides) the user simply is doing something that is independent of the hashing. Electricity is generating as a side effect of the searching activity. Muscle energy rather than visual/brain energy powers the device but by being on the periphery of the nervous system provides minimal interference with physiological function. From John Nash’s perspective of the worth of a machine, it makes no sense to build one that takes more time unless there is a need to multiply the kinds of tasks we want to compute and use the computer thus for. We do not need to a make a technology that forces one to compute and do tasks just because this is easier for the computer to instruct us to do — rather we should, I feel, build a machine that does the computations that we ‘ask’ it to do. That’s my ask for digital asset creation devices. We need devices that interact with us from the outside-in not the inside-out. The hand gryo when parallelizing the inputs and scaling to many users may be designed to speed up the rate at which machines take instructions. It looks at least initially to be able to make division as a decision requiring process since it can exist at the extremity of both locomotion and computation. This device is not a world computer — it will not compute anything but it might be made to sort digital assets. This is not something that Nash considered. New decentralized blockchain tech requires new ways to parallelize digital logic for it to correspond with our social and economic activities all the while attending to our personal actions similarly. Further it is helpful when evaluating what Nash said about bitcoin to understand how he thought about computers and mentality. He wrote a paper in 1954 called “Parallell Control” and he expressed the hope that computer part separations would result in self-programmable machines. While we are now able somewhat to create programs that program themselves there is no such thing as Von Neumann’s idea of computers making themselves that is in homology with biological evolution — there are no workable disciplines of applied metabiology here. There does appear to be such a thing as the evolution of social selection by avalanche protocol applications however. The idea of dividing currency into two coins that are bound dynamically to each other and separate formerly united capital in the system, as in POS, comes out of this general idea of Nash, however it does not lead to the extreme form that he had considered where he took the analogy quite literally and thought that the communication system of the computer and the mind’s parallels were organonically ( a term from the history of logic) and materially one and the same. This may have led to some of the symptoms he claims to have apperceived but it also gave him insight into the ideas of money before others followed on. Again, POW proponents may think that this is all just too complicated and that the gains are not worth the effort and that it is better and easier to demean past decisions but the point is that POW in POS makes Nash’ s ideal not into something directly tied to the entire global financial system nor into what Bitcoin is trying to do but rather into something that does all of that in a much more restricted way. We can directly map our human economics to animal and plant eco-evolutions and we can have a new future that is positive both for us and our interests as well as with those possessed by different species if we learn how to apply evolution rather than just discuss if it exists or not. The POW proposal of Microsoft has an analogy in the social selection of the wood wide web that further draws out the intricacy we are entering in on as a society of the 21 century — in explaining how rusts — which are fungal parasites of trees genotypically evolved into their strange and weirdly acting genetic cell types. These parasites may have taken advantage of the behavior of the mycelial network to game the social selection system of already cooperating individuals and produce throughout its geographic spread, a new kind of production of chemically fit individuals, from the outside — as sovereigns — by attaching themselves to multiple species evo-ecologically. Thus while it is possible that the Microsoft proposal can be built, it will add the kind of complication that might be suggested rusts have already inserted into the ecosystem of life itself already here on earth. The value of new blockchain techs will not only come from those who have adopted it but from those who adapt DAGs( directed acyclic graphs) to many different activities that might be homologized in tree-wise topologies of time in space — otherwise known as phylogenies. So while this still reads as a fiction and I jumped to the end before I really began — I suggest you try it again, and again…while you gain away the pain the cooperation will appear — it is a joy to realize that the past is is just that — past. Or just ask me a question directly.
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