Charlie Lee Nails It

“It’s hard to say what will happen when it starts reaching the limit. Right now, the coin is working, Bitcoin and Litecoin are working because the mining reward is paying for the security… When you rely on fees and if the fees aren’t enough because the block size is constrained, then what happens? The security will drop. Is it better to have some small inflation every year and have that fixed and have that pay for the security or can transaction fees pay for security?”

-- Charlie Lee in https://www.youtube.com/watch?time_continue=98&v=aHOcTllK1_c

 

 

 

 

The Importance of the Monetary Supply Curve

Well that's a rather imposing title isn't it.

If you're going to talk about exchange commodities, you probably ought to consider how they are being issued.  A lot of cryptographic assets are issued today like type "D" in the above diagram, a standard ICO or full premine.  The trouble is that this puts all the coins in some small number of hands, which makes for unstable markets dominated by whales.  It's a top-heavy structure and while it can be propped, and perhaps grow some understory via trickle-down and some good marketing to adoption, this is probably not where you want to be in the long term.  Unless of course you got in at the very beginning, in which case: good luck finding the top.

The curve "A" sure looks a lot better at the start, as miners are able to generate coinbase transactions that keep the market from overheating and put coins in new participants hands.  However you can see from the plot that after enough time (by 2030 or so), the economy looks from a distance very much like curve "D".  The coinbase is nearly gone and now you have an entrenched whale class who moves markets at will, and little to give incentive to miners apart from a fee which drives away users.

Curve "B" solves this problem neatly but with one aesthetic flaw, namely that it has no cap to the supply and thus appears to not be a great long-term store of value.  Sure the miners are taken care of and the economy can grow in a relative stable manner but still the competition of less inflationary coins will drive the value down.  A lot of satoshi codebase coins leave this as the endstate after various early distribution schedules.

Curve "C" leads to large interest rates and hyperinflation, which could be desirable in certain situations but not for the long term wealth management crew.

This leaves us with curve "D", hastily drawn on in crayon.  This one is the logarithmic supply curve.  As you can tell it is capped, allowing for avoiding runaway inflation, and yet there is substantial coinbase reward to issue new currency for a very long time.  This should keep the price relatively stable by avoiding shocks and finding a balance between inflation resistance and coinbase incentives.

What do you think, which supply curve would you rather have in your coin and why?

 

Bitcoin as a Matriarchal Economy

Start at around 50:00 or so for the two minute version 🙂

WATCH: Vin Armani on Cryptosavagery, Patriarchy vs. Matriarchy And Culture

Ico Roundup Infographic

Crypto Kings Infographic

This post is a suggestion from a reader, taken from https://bitfortune.net/top-crypto-kings/

 

Battle of the Blockchain

After bitcoin block 15323 was solved, more than 24 hours passed before the next block.  This is quite a bit longer than the target time of ten minutes.  Looking through the blocks at that time we see that they are mostly all empty, and there isn't much action with the difficulty.  Even a full day of the network and - not a single transaction.  This was the first year of mining and a lot of people just happened to turn their computers off for a spell.

Fastforward to 2016, now looking at the Woodcoin block chain.  In some sense we see a similar phenomenon, some long periods sans blocks.  This is a small coin, barely worth more than bitcoin was worth in 2009 at the time of block 15323.  However the mechanics here were very different:  a real battle over the blockchain.  Here's a chart showing some of the action:

 

You can see that most of the time, the network produces blocks near the target time of 2 minutes, which is 720 blocks per day.  However starting in late 2015, and continuing off and on until early 2017, the number of blocks per day drops quite a bit.  What was happening?

Drive-by Hashing

What was happening was that unknown miners were dropping a large amount of hashpower on the network, waiting for the difficulty to go up, and then leaving the network.  The rest of the miners then were forced to mine at much lower profitability as they struggled to solve blocks at a fraction of the usual rate.  For much of this time period a mining rig of 10 or so nvidia GPUs may have been enough to dominate the network and pull off such a disruption.

While waiting longer than usual for your transactions to clear with an anonymous exchange might be annoying, it isn't a disaster.  Transactions eventually go through, and are inherently unalterable so shouldn't cause any worry.  However some other shenanigans also appeared on the network during this time.

Rewinding the Drive-by

Although it isn't visible in the block chain today (which keeps only the longest chain demonstrating the most skein work), there was in fact another interesting battle occurring on the woodcoin blockchain in 2016.  Some might remember that large chain reorganizations occurred during this time as well.

Why the reorganizations?  It appears that somebody found a way to battle the drive-by hashers by simply not accepting the rapid blocks they published to the network.  Instead, a second group of miners mined in private on the chain of the previous (lower) difficulty.  Because the drive-by miner always left and then didn't continue to mine woodcoin blocks, eventually this new party was able to surpass the work of the driveby-hasher's chain and then submit their new longer chain to the network, claiming these blocks for themselves.

This caused some trouble, as pools suddenly saw all their winnings orphaned.  They complained and in one case even dropped support for woodcoin.  However, this was an amazing test of byzantine consensus and robustness of the woodcoin network using the satoshi protocol.  Consider it a stress test.

Could something like this happen today?  Well maybe.  The hash rate is a lot higher today however:

As the hashrate grows, it becomes harder and harder to play these kind of games in a profitable manner.  While this is great for the health of the woodcoin network it's a drag for those of you looking for blockchain battles and associated drama.  Well we can't please everyone can we.

 

 

 

 

 

ASIC Resistance : wtf is that?

Hello Everyone!

Maybe some of you have heard the claims of "ASIC resistance" amongst some proponents of this or that new proof-of-work algorithm, or even some non-work centralized algorithm.  "ASIC Proof" even.

Lets talk about what this might mean.

First off, it's worth pointing out that doing the appropriate hash function faster will make you more profit as a miner.  It's a computational problem, how fast can we compute these functions.

Consider some somewhat similar computational problem, that of factoring an integer or determining the discrete logarithm of some large number.  Here we have a nice history to look at, and we see that two areas have sped up this computation:  1)  Hardware    and     2)  Algorithm development (software).

There is no reason to suspect that hashing for proof-of-work public networks will be any different.  The algorithms and software WILL improve, and the hardware WILL improve.  This viewpoint might come from somebody who was alive during the peak stages of Moore's law, but still - that's really the way it is.  Software will improve, hardware will improve.

Provided of course that the network in question provides enough rewards to incentivize us to improve!

If the network hash remains worthless, then sure - we might not bother to get specially improved software or hardware.

So does "ASIC-Restistant" then mean that the coin will be worthless?  That would do the trick, but then again "resistance" implies that somebody was trying to break into the house, not that the materials visible through the windows were not worth bothering with.

That's probably not the type of ASIC resistance those who throw term about are going for.

But what else could it mean?  Several coins have now had proponents claim "ASIC Resistance" and have gone on to have promising futures :  Litecoin (and other Scrypt coins), Bytecoin (with Monero et al.),  Ethereum (Equihash et al.), and others.  However a quick search will show that dedicated mining hardware is available for all of these coins.

Is there any room for a valuable computable which cannot have a specific integrated circuit for its application?  I don't see any.  What am I missing?