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Offline Rune

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Merging Ethereum and BitShares
« on: January 09, 2015, 12:03:10 AM »

This is just a thought experiment/grand scheme of world domination. Not meant to be taken too seriously.

The idea that BitShares and Ethereum could beneficially merge in some way occured to me when I first watched the reveal of Mist, the ethereum "browser" https://www.youtube.com/watch?v=IgNjs_WaFSc . Until then I'd arrogantly dismissed it as a gimmick project, and never looked beyond the superficial explanations, mostly because I'm dumb. It's only when I realized that what they call Dapps is basically block chain versions of what we currently know as websites, but harnessing the full trustless and antifragile potential of block chain technology combined with p2p filesharing and secure messaging. Ethereum is going to change everything we know about the web, and fully deserves the "web 3.0" moniker. It's going to open up a blue ocean market of unknown size and with unknown ramifications for human society. To give an example of the kind of thing we'll be competing against: While we try to get bitassets adopted by dark markets, the dark markets might simply move to exist entirely on ethereum because it can function as a superior version of TOR that is fully integrated with a trustless payments system that can still earn the creator income.

If BitShares is a nation, Ethereum is a planet.

As a maximalist, I know that long term BitShares would either have to copy Ethereum entirely, and attempt to bootstrap its own "web 3.0" economy on this "bithereum" and have it eventually outgrow Ethereum, or someone will port market pegged assets to Ethereum and these "EthAssets" will become more popular over time since they can be used natively in the digital economy. Either way one block chain (or rather, base token) will kill the other. It'll be BTS vs ETH, and one set of community, users, investors and developers will end up getting screwed over because their unique product will be copied and market and network eventually taken from them.

The only solution to avoid "bloodshed" is to merge the two block chains and communities, and trying to figure out how that can be done is what I've been thinking really hard about. Obviously that wouldn't just "avoid bloodshed", it doesn't require a lot of imagination to realize that Ethereum + BitShares would be an insanely powerful force making everyone involved absurdly rich. But how?

Before I bothered to understand it, I'd always imagined that Ethereum, as this "gimmick turing complete fancy little block chain for nerds", would end up becoming a sidechain of BitShares, where all the useful stuff could then be put on the primary BitShares block chain. However, the reason why Ethereum exists in the first place is because of the reality that over time it's not efficient to hard fork a new transaction type into the block chain every time someone comes up with some new feature that's useful. If block chain scalability is eventually solved (which I think most people believe it will be), then eventually all block chains will have to become turing complete, and all transaction types will have to be rewritten using a generalized contract language (as Ethereum calls it). Even BitShares would eventually have to be reinvented as a turing complete block chain, and the hard coded market pegged assets would likely have to be replaced by scripted MPA's, in order to streamline and optimize everything. So, my point is, while I used to think that it should be Ethereum that "joined" BitShares, I now realize that it will have to be the other way. The BitShares DAC will have to move to the Ethereum block chain.

So my first naive thought was that we'd basically have to approach the ethereum community and beg for them to sharedrop on us some amount of ETH, then have our core devs join the ETH foundation and code market pegged assets into ethereum from there. This would essentially mean that we'd have to completely scrap the bitshares toolkit and more than a years work gone down the drain. As an entrepreneur I wouldn't actually be that "afraid" of this since it'd just be a pivot, something many successful startups have done. But it'd obviously be a huge waste and something that our community and the developers would never accept (even if the alternative was risking a crash to zero), as well as something that ethereum likely wouldn't see any value from and wouldn't accept either.

Okay so all of this was just the build up to my actual "proposal", or idea for how a merger between our two communities, dev teams, and block chains could be efficiently done in a way that leverages the strength of both and benefits all parts.

-Using the BitShares block chain as the vehicle for kickstarting the network effect of Ethereum, and seed it with a popular, self sufficient banking and exchange DAC, through a gradual merger-

(So we assume that we approach the ethereum community and they go along with this idea. )

The deal will be this: BitShares users are to get 1/3* of all ether for eventually migrating our community and products to the ethereum block chain. That's 40 million ETH or around 1 ETH per 625 BTS. It would put the valuation of ethereum at 70 million USD (an instant 400% return for ICO investors), which is honestly a bit on the low side, but so is the valuation of BTS.

In return bithshares will spend all of 2015 using our finished block chain and working products to attract a huge userbase of real users from demographics that wouldn't otherwise know about or get into bitassets or ethereum. Once the ethereum light client is ready and ethereum is ready for mainstream adoption, we'll end on standalone block chain and migrate all the users to join the ethereum ecosystem, ensuring instant network effect and total dominance of the block chain industry.

(*just my suggested valuation, will likely end up being something different)

So here's how I imagine it could happen over the course of the gradual merger.

The back-end/block chain core devs of BitShares will immediately join Ethereum as c++ client core devs. Blacksburg will turn into a new ethereum development hub (to complement their existing Berlin and Amsterdam hubs).  Frontend devs will stay with the BitShares block chain at first and turn market pegged assets into a great product with light and mobile client support, that can be marketed throughout 2015.

Once the Ethereum block chain launches these devs will also be responsible for making an ethereum metacoin that will temporarily be called BitShares ETH and will eventually replace the current BitShares once our stand alone block chain is phased out.

Once BitShares standalone is functional with wallets working well enough to begin serious marketing to our target demographics (argentina, venezuela, russia, africa, black markets, swiss bank customers etc.), the bitshares devs will begin focusing entirely on implementing the BitShares Exchange on ethereum, using BitShares ETH as the mechanism for selecting price feed delegates. BitAssets will be backed by ETH, since that is the base token of the block chain. We'll temporarily call these ETHassets. BTS ETH delegates will gain income from things like exchange fees, order overlap, and perhaps a slice of the yield for every ETHasset. Long term, as the BitShares community finds new markets, the range of income can increase and the new BTS will become a valuable asset in addition to ETH itself.

Meanwhile as ethereum is working out its kinks and probably having all sorts of trouble in the beginning, likely also having almost no dapps creating actual value, bitshares standalone will be hard at work marketing bitassets and gathering a huge amount of new users who interact with the bitassets through simple interface and will not care about what system is running underneath. A one-way, proof of burn peg from 625 BTS to 1 ETH will be in place, so BTS holders always know that they can receive what they've been promised. However bitassets will likely be a lot more liquid on the standalone chain, along with bitasset exchange support and UIA gateway integration.

After one year, in early 2016 after Ethereum has switched to PoS and their light client is finally out, the final merging will happen. The ethereum light client will be bundled with all bitshares clients. The bitshares block chain will then stop block production, and all bitassets will be sharedropped 1:1 into the ETHassets on ethereum, while all BTS will be sharedropped 625:1 as ETH on the ethereum block chain. Collateral will stay tied up as colleteral on ethereum, assuring that the bitasset markets will stay completely solvent and will be able to continue trading right away as if nothing happened. The bitshares clients will be able to use the bundled ethereum light client to instantly claim their sharedrop, so average users will see no difference except for a confirmation box asking them to approve importing their private keys into the ethereum client. They'll also have their name migrated, unless it's already taken in which case they'll have to register a new one (so people will be encouraged to do this in advance).

Around this time the ethereum ecosystem will likely have grown up, and the BitShares Exchange will already be heavily used on the ethereum block chain, with ethUSD (which now can finally be called real bitUSD) integrated with the dapps that actually create value. As the block chain switch happens a flood of new users will now join the ethereum ecosystem and can begin using all these new value-adding dapps through the ethereum light client. Around this time ethereum will actually be a full product, and because of the bitshares kickstart it will have a huge amount of active users, giving it a guaranteed critical-mass network effect.

BitShares will continue to exist as a DAC forever, with our community spreading the usage of bitassets, doing marketing and outreach that benefits both our community and the ethereum ecosystem at large. As ethereum explodes in value and popularity, and bitassets becomes the currency most people use when interacting with it, bitshares will begin to earn significant income that will be enough to pay a high salary for the developers that didn't become ethereum core devs, who can then instead continue to work on creating new banking and exchange related products that can earn BTS holders dividends.

Okay, that's almost the wall of text. I don't think this is likely to happen because it'll be close to impossible to agree on a BTS-to-ETH valuation, and there's a good chance that the ethereum community will simply not accept the premise that block chain communities can merge out of principle, even if they think it'll benefit both parties.

But I can't help but hope it will go through somehow, because ethereum + bitshares is really my biggest dream, and I'd hate to see one of the two communities go extinct. If our community rejects the idea of a merger, I might still try to get BitShares ETH and "ethassets" running myself, since I'm convinced that market pegged assets will be copied either way and it's important that the bitshares community gets to benefit from them. In this case half could be sharedropped to BTS holders, and the other half ICO'd to cover development cost of porting the bitshares exchange and market pegged asset code to ethereum.
« Last Edit: January 09, 2015, 01:58:14 AM by Rune »

Offline donkeypong

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Re: Merging Ethereum and BitShares
« Reply #1 on: January 09, 2015, 12:27:10 AM »
Rune, you don't shy away from bold ideas and controversy, do you? I think it's very important to keep these two groups talking with one another and hopefully sharing their potential for synergy.

Offline speedy

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Re: Merging Ethereum and BitShares
« Reply #2 on: January 09, 2015, 12:37:42 AM »
Yes very bold post, but...

Q: Has Ethereum acknowledged that BitAssets are the best way to solve the volatility problem as well as the exchange counterparty risk problem?
Q: Has Ethereum acknowledged that a blockchain needs to have an efficient consensus mechanism that doesnt burn wealth from the stake holders, or are they still lazily clinging on to mining?
Q: Is Ether going to be tied up as 300% collateral for dozens of BitAssets?

The answer to these questions are all no, so I think BitShares can hold its own. Also, wouldnt you say that as soon as Vitalik writes a blog post saying "we are copying DPOS", or "we are copying BitAssets using Serpent", that will be great publicity for us, and we have a cleaner more trustworthy implementation of BitAssets, as well as the BitUSD brand name.

Copying BitShares technology would be an admission that this is where the strongest blockchain innovation is. And if they dont copy BitAssets and DPOS, then what is the point of holding large amounts of Ether? Sure I might buy a few Ethers to run a few contracts, but do I need lots of it? No.

BitShares will be the most secure global Bitcoin exchange with the most liquidity and tightest spreads. Ethereum will host a few niche Dapps. What is the killer Dapp for Ethereum anyway?

In terms of a platform for decentralized websites, wouldnt you say MaidSafe will eventually be better?

Btw Gavin already wrote a blog post saying "no mergers".

If Ive said anything incorrect in this post, someone correct me...
« Last Edit: January 09, 2015, 12:56:01 AM by speedy »

Offline Stan

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Re: Merging Ethereum and BitShares
« Reply #3 on: January 09, 2015, 12:42:18 AM »
Wow, I may have to hand over my favorite motto...

Anything said on these forums does not constitute an intent to create a legal obligation or contract of any kind.   These are merely my opinions which I reserve the right to change at any time.

Offline Rune

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Re: Merging Ethereum and BitShares
« Reply #4 on: January 09, 2015, 12:48:56 AM »
Rune, you don't shy away from bold ideas and controversy, do you? I think it's very important to keep these two groups talking with one another and hopefully sharing their potential for synergy.

This was also my initial thought. Bitshares and Ethereum can stay independent and synergize, like bitshares could function as the decentralized exchange for ETH, and both communities would benefit from this relationship (bitshares gets fees, ethereum gets liquidity). But what will happen if a large amount of overall investment in ether is actually held as bitETH rather than ETH? The ethereum community will not like that, they'll work hard to make their own decentralized exchange instead (in fact there's already one underway https://github.com/etherex/etherex). How will bitshares traders respond to EthAssets (If we don't simply create and sharedrop them on ourselves as I think we should)?

I'm really just conflicted about this whole thing. Bitshares has the massive advantage that we actually are conscious about how to make money from a DAC. The ethereum community is just as interested in getting "to the moon" as we are, but they don't seem to really understand how a block chain actually profits, and will likely not be as zealous as we are at promoting their market pegged assets to new users. But if ethereum manages to bootstrap a decentralized digital economy, there's no point in trying to compete. Everything shall be assimilated even more efficiently than how I imagined it would happen with paid delegates.

Offline toast

Re: Merging Ethereum and BitShares
« Reply #5 on: January 09, 2015, 12:53:42 AM »
disorganized collection of thoughts, will edit as I think of more:

* Ethereum has some technical limitations that prevent it from implementing bitassets as effectively as us on their first chain
* Ethereum has much a better "feel-good" story for developers
* Ethereum does not have the ability to direct capital the way ether holders want
* Ether holders would probably never accept any sort of merger or sharedrop
* Implementing EVM smart contracts on BTS won't be too difficult. I expect the EVM to be a standard service offered by any blockchain
* There will be competing chains no matter what, Mist or w/e replaces it will have multi-blockchain support no matter what (eris+decerver plugin is what I'm eyeing)
* Dapps follow a "long tail" distribution, and we've identified the 3 or 4 dapps that will probably represent a majority of the money to be made in this space. Lets focus on winning network affect with bitassets and getting people's online IDs on our system
« Last Edit: January 09, 2015, 12:57:54 AM by toast »
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Offline Rune

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Re: Merging Ethereum and BitShares
« Reply #6 on: January 09, 2015, 12:59:58 AM »
Quote
Q: Has Ethereum acknowledged that BitAssets are the best way to solve the volatility problem as well as the exchange counterparty risk problem?

Ethereum won't have to acknowledge this for market pegged assets to come into existence. If you already have a functional exchange, it's gonna be pretty easy to code market pegged assets into it.

Quote
Q: Has Ethereum acknowledged that a blockchain needs to have an efficient consensus mechanism that doesnt burn wealth from the stake holders, or are they still lazily clinging on to mining?

Mining is basically gonna be used as marketing tactic/faucet and they'll migrate to PoS after a while. Considering how mining appeals to the most basic greed of "printing free money" I think this is a pretty smart move.

Quote
Q: Is Ether going to be tied up as 300% collateral for dozens of BitAssets?
If someone bothers to copy bitassets, then yep.

Quote
Btw Gavin already wrote a blog post saying "no mergers".

If this were actually to become a thing, it should be pitched directly to their community. The ethereum community is just as craving of their block chain becoming an instant hit as we are. If they saw enough value in this there might be enough support to convince him otherwise. Ultimately, like any other community, he'll listen to the stakeholders...... That being said the stakeholders will probably listen to him first and foremost and if he's made a good enough argument for why it won't add value then they'll never get convinced.

Anyway, I don't think ethereum will "kill" bitshares. This is not really a "doom" post, because I'm sure we'll see at least one huge rally within a year, and during that time ethereum won't even have a light client. So there'll be plenty of money to go around and there's no need to fear that bitshares will just be outcompeted in the short or medium term.

Offline toast

Re: Merging Ethereum and BitShares
« Reply #7 on: January 09, 2015, 01:00:35 AM »
LOL, great job @ the shamless pumper who submitted this to r/ethereum. You sure know how to ruin our reputation in the space.
Do not use this post as information for making any important decisions. The only agreements I ever make are informal and non-binding. Take the same precautions as when dealing with a compromised account, scammer, sockpuppet, etc.

Offline Ander

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Re: Merging Ethereum and BitShares
« Reply #8 on: January 09, 2015, 01:02:26 AM »
A true Bitshares/Ethereum merger at a fair price would make me happy.  But I doubt it will happen.


Also keep in mind that Ether, having not been tradeable for all these past months of crypto bear market, was not able to suffer in this price decline.  It still gets to look nice and shiny, because people who bought its IPO have never had tradable coins that they were able to see fall in price, which would have occurred, just like with every other crypto out there.


Eventually, it will be released, and probably have a hype bubble at some point, and an inevitable harsh decline afterwards, just as we have had, and bitcoin has had, and every crypto has had.  That will be an opportunity to buy some cheap ether and hedge your bets.  For now, all we can do is buy our cheap BTS and wait for the crypto bear market to finally end.  (Which I must say is sure taking its sweet time!  I certainly didnt expect this bear to last 13 months as it has, and possible longer).
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Offline Ander

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Re: Merging Ethereum and BitShares
« Reply #9 on: January 09, 2015, 01:06:02 AM »
As Toast said, if we build the functionality of several of the most profitable features, and get some network effect, then bitshares will do well even if Ethereum has additional unprofitable features.


More than one internet company exists today.  None of google or amazon or facebook controls 100% of the profit potential of the internet.   If we capture the exchange and asset feature well, bitshares will do great.
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Offline Rune

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Re: Merging Ethereum and BitShares
« Reply #10 on: January 09, 2015, 01:06:21 AM »
Quote
* Dapps follow a "long tail" distribution, and we've identified the 3 or 4 dapps that will probably represent a majority of the money to be made in this space. Lets focus on winning network affect with bitassets and getting people's online IDs on our system

I agree with this, and ultimately the reason why I'm "scared" of the ethereum "website dapps", is because they seem like such a wicked good way to kickstart bitasset network effect.

I'm happy to see that people don't get as scared of having ethereum as a competitor as I got at first, though. Also happy about the prospects of copying the EVM. What about swarm and whisper? Can we simply use swarm and whisper from ethereum directly?

Offline Rune

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Re: Merging Ethereum and BitShares
« Reply #11 on: January 09, 2015, 01:08:58 AM »
LOL, great job @ the shamless pumper who submitted this to r/ethereum. You sure know how to ruin our reputation in the space.

Lol... Ultimately the ethereum community is as money hungry as every other coin... Should I delete OP?

Offline toast

Re: Merging Ethereum and BitShares
« Reply #12 on: January 09, 2015, 01:11:19 AM »
LOL, great job @ the shamless pumper who submitted this to r/ethereum. You sure know how to ruin our reputation in the space.

Lol... Ultimately the ethereum community is as money hungry as every other coin... Should I delete OP?

No, but if you can't tell the difference between this thread and the thing posted to reddit then you should contain your opinions to this forum
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Offline speedy

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Re: Merging Ethereum and BitShares
« Reply #13 on: January 09, 2015, 01:17:04 AM »
Quote
Q: Has Ethereum acknowledged that BitAssets are the best way to solve the volatility problem as well as the exchange counterparty risk problem?

Ethereum won't have to acknowledge this for market pegged assets to come into existence. If you already have a functional exchange, it's gonna be pretty easy to code market pegged assets into it.

Not disagreeing, but which do you trust more: the blockchain that specializes in and invented the crypto bank account & collateralized exchange, or some Serpent script that rips off the idea?

Offline arhag

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Re: Merging Ethereum and BitShares
« Reply #14 on: January 09, 2015, 01:19:13 AM »
Even BitShares would eventually have to be reinvented as a turing complete block chain, and the hard coded market pegged assets would likely have to be replaced by scripted MPA's, in order to streamline and optimize everything.

I disagree with this. You don't want to put everything on the slow VM. You want certain things written natively so that they are accelerated. Certainly there is a huge place for Turing complete scripts, but there is also an important place for native features. I think what is really important is to have a good method of coming to consensus on feature upgrades that are requested to be developed, and then a binding way to vote for the hard fork features to activate on the blockchain (this would obviously only happen after enough people have upgraded to the new clients supporting those features).

Before I bothered to understand it, I'd always imagined that Ethereum, as this "gimmick turing complete fancy little block chain for nerds", would end up becoming a sidechain of BitShares, where all the useful stuff could then be put on the primary BitShares block chain.

This sidechain idea is still valid in my opinion. You can pay for all of the Dapps running on the blockchain specializing on general purpose computation using BitAssets that derive their value from the root DAC in which they are shorted into existence and collateralized by BTS. That is what I propose here.

Now I personally don't think we will be able to achieve consensus between BTS and ETH stakeholders and join forces. But let's say it was possible. We would need a way to negotiate the terms of the merger. Simply arbitrarily picking percentages or having negotiations between Dan and Vitalik isn't going to cut it. The stakeholders need to come to a consensus. So I suggest the following method if you did in fact want to go through with this merger:

We modify the BitShares codebase to allow for BTS stake to also vote for a percentage between 0% and 100% in addition to a delegate slate, and update the BitShares client to this new codebase. We launch a DPOS no-BitAsset clone of this new BitShares with the genesis allocated to ETH stake (call this ETH'). We would have to convince the Ethereum community to import their private keys into the client and use it to vote for their preferences with the understanding that if the merger goes through their original ETH allocation will be worthless and this new ETH' will end up having value (at least temporarily until it is snapshotted into yet another token). BTS holders will be voting for the smallest percentage allocation in a new combined token (call it BTS') that they will accept, with the remainder being distributed to ETH' holders. Similarly, ETH' holders will be voting for the smallest percentage allocation in BTS' that they will accept, with the remainder being distributed to BTS holders. This gives us a distribution of each community's stake over the percentages they each accept in the new combined token. We search for the percentage breakdown that maximizes the sum of the percentage of stakeholders approving of that breakdown for each of the communities (with equal weights for each community in the sum). If the lesser percentage of stakeholders approving of that optimal breakdown between the two communities is larger than X% (I suggest an X = 75), then we go through with the merger. If after some point in time (after people change their votes back and forth and stake ownership shifts around) the previous condition is not satisfied, then we give up on the idea.

If the merger is to go through and we have our consensus percentage breakdown, we can then hard fork BTS to BTS' (with its new stake allocation) and let the previous ETH' holders (who were previously ETH holders) join our community with a fungible asset we all share. At that point, the Ethereum devs and their crowdsale funds follow along with the community. At some point, when the Proof-of-Stake version (ideally using DPOS) of Ethereum (with BitAssets added) is ready, the client can hard fork again from the BitShares client to that new Ethereum client. We can also rename BTS' to something else and do an overall rebranding to something else (decided by BTS' stakeholder consensus).
« Last Edit: January 09, 2015, 01:42:07 AM by arhag »

 

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