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Main => General Discussion => Topic started by: santaclause102 on December 21, 2014, 11:59:47 pm

Title: Vitalik on stable currencies and POS
Post by: santaclause102 on December 21, 2014, 11:59:47 pm
https://www.youtube.com/watch?v=qPsCGvXyrP4

On cc price stability: From 01:20:00 on price stable cc. The approach he mentions works about like this: The protocol issues more coins if price goes above the feed price (USD feed for example) and destroys / buys back coins if price goes below price feed.
There are two currencies: A stable coin and a volatile coin. In case it is necessary to increase stable coin supply, stable coins are auctioned of for volatile coins. 
In case stable coin money supply has to shrink the auction is the other way around (volatile coins auctioned of for stable coins).
The above is from Vitalik's talk. Here is a more detailed whitepaper: https://github.com/rmsams/stablecoins/blob/master/00-main.pdf

On POS: Vitalik turned a POS fan. Not much new, except for 01:08:00 - 01:10:05. But overall not yet that well thought out.
 
Title: Re: Vitalik on stable currencies and POS
Post by: CLains on December 22, 2014, 02:13:15 am
I hope BM keeps up sessions with him, Vitalik is awesome :)
Title: Re: Vitalik on stable currencies and POS
Post by: santaclause102 on December 22, 2014, 02:32:27 am
I hope BM keeps up sessions with him, Vitalik is awesome :)
he appears to me as honest and purpose driven.
Title: Re: Vitalik on stable currencies and POS
Post by: Shentist on December 22, 2014, 06:53:09 am
sounds like Nubits.

in this case, i like our approach more.
Title: Re: Vitalik on stable currencies and POS
Post by: Markus on December 22, 2014, 10:00:28 am
sounds like Nubits.

in this case, i like our approach more.

with the difference that Nubits are not bought back/destroyed when in oversupply. They are just hidden :)
Title: Re: Vitalik on stable currencies and POS
Post by: bitsapphire on December 22, 2014, 10:22:47 am
This sounds like a more efficient fiat pegging to me. Similar to how other countries try to peg their currency to the USD.

Still not fictional enough. I like though that he seems to be driven by purpose rather than ego. Good company to be in.
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 22, 2014, 08:32:31 pm
The design of their peg is very similar to various discussions we have had around here.

The trouble is  how to determine when to buy/sell the stable coin.  How quickly can the price adapt?   

Here is the ultimate crux of the issue:  it socializes the risk of the volatile asset falling in value on the volatile asset. 

Their system is effectively like BitShares without any margin.  The entire network provides the margin with unlimited printing press.   The network has no way of 'pricing the risk of issuing stable coin' and thus could potentially amplify the volatility of stable coin with huge bouts of inflation in volatile coin supply.   Market manipulators could use this to great effect.

Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 22, 2014, 09:07:56 pm
So the price stabilization system that I described in the presentation, Robert Sams' seignorage shares, is a good system, but it's not the system that I personally prefer. The big problem that I see with it is the lack of a stable wind-down option, so if it becomes obvious that the system's influence is only going to decrease over time then the volcoin could easily hyperinflate leading to the stable coins losing all their value. I think that the SchellingDollar approach, which I've described and specified in several places now, ultimately has nicer wind-down properties, although at the cost of its volcoin having much lower crowdsale potential.
Title: Re: Vitalik on stable currencies and POS
Post by: santaclause102 on December 22, 2014, 09:21:06 pm
So the price stabilization system that I described in the presentation, Robert Sams' seignorage shares, is a good system, but it's not the system that I personally prefer. The big problem that I see with it is the lack of a stable wind-down option, so if it becomes obvious that the system's influence is only going to decrease over time then the volcoin could easily hyperinflate leading to the stable coins losing all their value. I think that the SchellingDollar approach, which I've described and specified in several places now, ultimately has nicer wind-down properties, although at the cost of its volcoin having much lower crowdsale potential.
Could you give us a run down on how it works in particular in contrast to Bitshares' market pegged assets and where you see the advantages (and disadvantages) of your proposal? - Assuming that the objectives of both systems are (roughly) the same.
Title: Re: Vitalik on stable currencies and POS
Post by: Ander on December 22, 2014, 09:43:38 pm
sounds like Nubits.

in this case, i like our approach more.

with the difference that Nubits are not bought back/destroyed when in oversupply. They are just hidden :)

Actually Nubits has changed this (or will change this), and Nubits can be burned now.  Thus making them 100% less ponzi-ish.
Makes them a stronger competitor, which just makes it all the more important for us to have decent marketing.
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 23, 2014, 05:19:32 am
So the price stabilization system that I described in the presentation, Robert Sams' seignorage shares, is a good system, but it's not the system that I personally prefer. The big problem that I see with it is the lack of a stable wind-down option, so if it becomes obvious that the system's influence is only going to decrease over time then the volcoin could easily hyperinflate leading to the stable coins losing all their value. I think that the SchellingDollar approach, which I've described and specified in several places now, ultimately has nicer wind-down properties, although at the cost of its volcoin having much lower crowdsale potential.
Could you give us a run down on how it works in particular in contrast to Bitshares' market pegged assets and where you see the advantages (and disadvantages) of your proposal? - Assuming that the objectives of both systems are (roughly) the same.

Actually, before I can compare schellingdollar to bitshares market pegged assets first I would like to know exactly how bitshares market pegged assets work :)

Nikolai was kind enough to forward me http://bytemaster.github.io/article/2014/12/18/What-are-BitShares-Market-Pegged-Assets/ but I need a while to digest it; can anyone perhaps make a 5-point summary similar to what I had at https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/ ?
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 23, 2014, 05:56:38 am
So the price stabilization system that I described in the presentation, Robert Sams' seignorage shares, is a good system, but it's not the system that I personally prefer. The big problem that I see with it is the lack of a stable wind-down option, so if it becomes obvious that the system's influence is only going to decrease over time then the volcoin could easily hyperinflate leading to the stable coins losing all their value. I think that the SchellingDollar approach, which I've described and specified in several places now, ultimately has nicer wind-down properties, although at the cost of its volcoin having much lower crowdsale potential.
Could you give us a run down on how it works in particular in contrast to Bitshares' market pegged assets and where you see the advantages (and disadvantages) of your proposal? - Assuming that the objectives of both systems are (roughly) the same.

Actually, before I can compare schellingdollar to bitshares market pegged assets first I would like to know exactly how bitshares market pegged assets work :)

Nikolai was kind enough to forward me http://bytemaster.github.io/article/2014/12/18/What-are-BitShares-Market-Pegged-Assets/ but I need a while to digest it; can anyone perhaps make a 5-point summary similar to what I had at https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/ ?

1) We assume a trusted price feed exists
2) We assume an asset with no counter party and sufficient market liquidity at a market established price (Bitcoin, BTS)
3) Two parties enter a "contract for difference" on the price feed, the short-side puts up 2x and the long side puts up 1x for a total of 3x held as collateral for issuance of BitUSD
4) The short may cover (burn BitUSD) at any time to gain access to the 3x collateral.
5) The short is forced to cover after 30 days by accepting any and all orders at or above the price feed.
6) The short is forced to cover if the price feed results in the value of collateral being equal to 2x or less the value of the BitUSD.
7) Shorts can only execute at the price feed (no selling BitUSD to 0)
8) Margin calls only happen at the price feed (no manipulating the internal market to cause a short squeeze)
9) Shorts are matched prioritized by interest rate they are willing to pay. 

Title: Re: Vitalik on stable currencies and POS
Post by: sumantso on December 23, 2014, 10:21:35 am
Why are you reposting?

To others - don't let him derail this thread.
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 23, 2014, 12:27:29 pm
So the price stabilization system that I described in the presentation, Robert Sams' seignorage shares, is a good system, but it's not the system that I personally prefer. The big problem that I see with it is the lack of a stable wind-down option, so if it becomes obvious that the system's influence is only going to decrease over time then the volcoin could easily hyperinflate leading to the stable coins losing all their value. I think that the SchellingDollar approach, which I've described and specified in several places now, ultimately has nicer wind-down properties, although at the cost of its volcoin having much lower crowdsale potential.
Could you give us a run down on how it works in particular in contrast to Bitshares' market pegged assets and where you see the advantages (and disadvantages) of your proposal? - Assuming that the objectives of both systems are (roughly) the same.

Actually, before I can compare schellingdollar to bitshares market pegged assets first I would like to know exactly how bitshares market pegged assets work :)

Nikolai was kind enough to forward me http://bytemaster.github.io/article/2014/12/18/What-are-BitShares-Market-Pegged-Assets/ but I need a while to digest it; can anyone perhaps make a 5-point summary similar to what I had at https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/ ?

1) We assume a trusted price feed exists
2) We assume an asset with no counter party and sufficient market liquidity at a market established price (Bitcoin, BTS)
3) Two parties enter a "contract for difference" on the price feed, the short-side puts up 2x and the long side puts up 1x for a total of 3x held as collateral for issuance of BitUSD
4) The short may cover (burn BitUSD) at any time to gain access to the 3x collateral.
5) The short is forced to cover after 30 days by accepting any and all orders at or above the price feed.
6) The short is forced to cover if the price feed results in the value of collateral being equal to 2x or less the value of the BitUSD.
7) Shorts can only execute at the price feed (no selling BitUSD to 0)
8) Margin calls only happen at the price feed (no manipulating the internal market to cause a short squeeze)
9) Shorts are matched prioritized by interest rate they are willing to pay.

> Two parties enter a "contract for difference" on the price feed, the short-side puts up 2x and the long side puts up 1x for a total of 3x held as collateral for issuance of BitUSD

Question: suppose that A and B enter a CFD. Then, B decides that he does not want to be ultralong BTSX anymore and leaves the CFD. Is A stuck with volatility until her client can manually find a new partner?

If so, that's probably the main difference between your scheme and schellingdollar: in schellingdollar, CFDs do not have an explicit counterparty, and so A's stablecoin/volcoin balance is represented purely as a number pair without reference to anything else. Anyone can enter and leave a CFD against the system at any time. Of course, in this case it's entirely possible for the entire system to have a positive or negative balance of stablecoin, but an adjustable interest rate on stablecoin is used in these cases to encourage marginal holders to switch over so that the balance remains roughly zero.
Title: Re: Vitalik on stable currencies and POS
Post by: santaclause102 on December 23, 2014, 01:18:15 pm
So the price stabilization system that I described in the presentation, Robert Sams' seignorage shares, is a good system, but it's not the system that I personally prefer. The big problem that I see with it is the lack of a stable wind-down option, so if it becomes obvious that the system's influence is only going to decrease over time then the volcoin could easily hyperinflate leading to the stable coins losing all their value. I think that the SchellingDollar approach, which I've described and specified in several places now, ultimately has nicer wind-down properties, although at the cost of its volcoin having much lower crowdsale potential.
Could you give us a run down on how it works in particular in contrast to Bitshares' market pegged assets and where you see the advantages (and disadvantages) of your proposal? - Assuming that the objectives of both systems are (roughly) the same.

Actually, before I can compare schellingdollar to bitshares market pegged assets first I would like to know exactly how bitshares market pegged assets work :)

Nikolai was kind enough to forward me http://bytemaster.github.io/article/2014/12/18/What-are-BitShares-Market-Pegged-Assets/ but I need a while to digest it; can anyone perhaps make a 5-point summary similar to what I had at https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/ ?

1) We assume a trusted price feed exists
2) We assume an asset with no counter party and sufficient market liquidity at a market established price (Bitcoin, BTS)
3) Two parties enter a "contract for difference" on the price feed, the short-side puts up 2x and the long side puts up 1x for a total of 3x held as collateral for issuance of BitUSD
4) The short may cover (burn BitUSD) at any time to gain access to the 3x collateral.
5) The short is forced to cover after 30 days by accepting any and all orders at or above the price feed.
6) The short is forced to cover if the price feed results in the value of collateral being equal to 2x or less the value of the BitUSD.
7) Shorts can only execute at the price feed (no selling BitUSD to 0)
8) Margin calls only happen at the price feed (no manipulating the internal market to cause a short squeeze)
9) Shorts are matched prioritized by interest rate they are willing to pay.

> Two parties enter a "contract for difference" on the price feed, the short-side puts up 2x and the long side puts up 1x for a total of 3x held as collateral for issuance of BitUSD

Question: suppose that A and B enter a CFD. Then, B decides that he does not want to be ultralong BTSX anymore and leaves the CFD. Is A stuck with volatility until her client can manually find a new partner?


B needs to find a BitUSD seller (on the internal exchange) so B can buy BitUSD from that BitUSD seller and then exchange the BitUSD again for the collateral (BTS) at the exchange rate of BTS/BitUSD at which B entered the CFD. A can keep his BitUSD as long as he wants.
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 24, 2014, 06:25:10 pm
So, step 0: there exists a CFD with A at +$100 USD and B at -$100 USD

> B needs to find a BitUSD seller (on the internal exchange) so B can buy BitUSD from that BitUSD seller

Okay, now we have two contracts:

A at +$100 USD, B at -$100 USD
B at +$100 USD, C at -$100 USD

I can see here that B is neutral USD again. However, B is not fully neutral: the margins for the two CFDs are different, and so it's entirely possible for the first contract to margin-call, leaving B long.

> and then exchange the BitUSD again for the collateral (BTS) at the exchange rate of BTS/BitUSD at which B entered the CFD

Wait, what? Doesn't that mean that B is back to being short bitusd again?
Title: Re: Vitalik on stable currencies and POS
Post by: toast on December 24, 2014, 09:30:05 pm
I don't follow.

B buys $100 and covers his short. Now he's only long BTS instead of superlong BTS.  A is still long USD, C is short USD / superlong BTS. All B did was buy USD from C and use it to pay off his debt for his short, not interacting the bitUSD originally created by that short.

Quote
Then, B decides that he does not want to be ultralong BTSX anymore and leaves the CFD. Is A stuck with volatility until her client can manually find a new partner?

B can't leave the CFD unless he obtains 100 bitUSD somehow - either buys it out of a different short or lets his short expire and create a buy wall following the price feed.

Quote
in schellingdollar, CFDs do not have an explicit counterparty
the bitUSD holder doesn't have a specific counterparty either - the short which creates the USD is not any different from all the others.
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 27, 2014, 12:10:18 pm
So I'll be more specific. How are shorts and longs stored in the blockchain state database?

The model that I thought it was, is that CFDs are a list of the form (assuming only bts and bitusd):

Code: [Select]
[
    [short_party, long_party, strike_price, short_margin, long_margin, amount, expiry],
    [short_party, long_party, strike_price, short_margin, long_margin, amount, expiry],
...
]

The model you seem to be suggesting is that accounts are stored in the form:

Code: [Select]
[
    [bts holdings, usd holdings (+ or -)],
    [bts holdings, usd holdings (+ or -)],
...
]

Which is how SchellingDollar works. What is the bitassets approach exactly?
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 27, 2014, 02:30:43 pm
Bit usd is just a balance like bts. 
Short bit usd is stored as a market order at the call price with interest rate and expiration.  It is non transferable.   
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 27, 2014, 03:17:25 pm
This thread is a good example of why all developers should work together under a single block chain. Ethereum and bitshares has had to completely duplicate their work on inventing a stable crypto token. If ethereum and bitshares had been a single project then developers could have worked in parallel and blockchain tech would be twice as far today.

It'll come soon. Once 1.0 and the marketing push begins, bitshares will gain network effect and all crypto development will begin to integrate as delegates to leverage their value onto the bitshares community and avoid duplicating (and thus wasting) work.
Title: Re: Vitalik on stable currencies and POS
Post by: toast on December 27, 2014, 11:58:32 pm
So I'll be more specific. How are shorts and longs stored in the blockchain state database?

The model that I thought it was, is that CFDs are a list of the form (assuming only bts and bitusd):

Code: [Select]
[
    [short_party, long_party, strike_price, short_margin, long_margin, amount, expiry],
    [short_party, long_party, strike_price, short_margin, long_margin, amount, expiry],
...
]

The model you seem to be suggesting is that accounts are stored in the form:

Code: [Select]
[
    [bts holdings, usd holdings (+ or -)],
    [bts holdings, usd holdings (+ or -)],
...
]

Which is how SchellingDollar works. What is the bitassets approach exactly?

You have normal USD and BTS balances, and you have open margin orders which are a negative USD balance and a positive BTS balance in collateral. So like your latter case but usd and bts balances are not explicitly associated in pairs except for margin orders.
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 28, 2014, 06:18:44 pm
What do you mean usd and bts balances are not explicitly associated in pairs? All I was describing with my second case is that everyone has an account, and the data record for each account stores a quantity of bts and a quantity of usd, which can be positive or negative, but with margin limits.
Title: Re: Vitalik on stable currencies and POS
Post by: arubi on December 28, 2014, 06:36:24 pm
...
1) We assume a trusted price feed exists
...

This is the elephant in the room.

(It's Oracles all the way down...)
Title: Re: Vitalik on stable currencies and POS
Post by: speedy on December 28, 2014, 06:43:26 pm
What do you mean usd and bts balances are not explicitly associated in pairs? All I was describing with my second case is that everyone has an account, and the data record for each account stores a quantity of bts and a quantity of usd, which can be positive or negative, but with margin limits.

Does he mean that all balances are freely tradeable against each other?
Title: Re: Vitalik on stable currencies and POS
Post by: toast on December 28, 2014, 06:48:23 pm
What do you mean usd and bts balances are not explicitly associated in pairs? All I was describing with my second case is that everyone has an account, and the data record for each account stores a quantity of bts and a quantity of usd, which can be positive or negative, but with margin limits.

Sure, if "accounts" are an off-chain organizational concept and not an on-chain data structure. Typically balances have distinct keys, but even two balances with the same owner keys but different assets get different balance IDs.
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 29, 2014, 01:01:45 am
...
1) We assume a trusted price feed exists
...

This is the elephant in the room.

(It's Oracles all the way down...)

You already trust the core developers and core community members when you download the client on the internet. These are the same kind of people who run the delegates. It requires much more trust in a community to give your private keys to software they signed off on, than to give their stakeholders control over the price feeds. It results in no net risk increase from bitcoin IMO.
Title: Re: Vitalik on stable currencies and POS
Post by: arhag on December 29, 2014, 02:51:42 am
...
1) We assume a trusted price feed exists
...

This is the elephant in the room.

(It's Oracles all the way down...)

You already trust the core developers and core community members when you download the client on the internet. These are the same kind of people who run the delegates. It requires much more trust in a community to give your private keys to software they signed off on, than to give their stakeholders control over the price feeds. It results in no net risk increase from bitcoin IMO.

I don't think that is a good comparison. One can audit the code they download and compile once.

The answer isn't trust. The real answer is that people can audit the price feeds submitted by the delegates. If a delegate is manipulating the price feeds, this is provable by examining the blockchain, and there will be consequences for that delegate (they will get fired).

This is similar game mechanics to a bunch of oracles submitting their answer (in a two stage process: commitment then reveal) along with a deposit which will be taken away if their answer diverges significantly from the consensus result (e.g. the median for a quantitative measurements, or the mode for a qualitative one) and a reward if their answer is close to the consensus answer. It just isn't done automatically by the blockchain and instead requires human stakeholders to react (although there is no reason we couldn't add this automatic blockchain reward/punishment system to our system as well). The one benefit of letting the human stakeholders react to the provided price feeds is that the system can correct itself even if the majority of the oracles (in this case the delegates) all collude together.
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 12:44:10 pm
Quote
This thread is a good example of why all developers should work together under a single block chain. Ethereum and bitshares has had to completely duplicate their work on inventing a stable crypto token. If ethereum and bitshares had been a single project then developers could have worked in parallel and blockchain tech would be twice as far today.

So we're accepting that Bitcoin maximalism is nonviable but we're doing Bitshares maximalism now? Umm... how about no? :) I'm actually about to release a blog article describing why I think fragmentation and silos in cryptocurrency are an awesome thing, and the concept of one-x-to-rule-them-all in this space should go die forever. World is a lot more peaceful when you don't have everyone simultaneously trying to take all of it over. Though I do agree that there should be more collaboration on low-level components (eg. we've done a lot of work replicating a whole bunch of crypto functions like serialization, merkle trees, erasure coding and ECDSA in 5 languages that others should feel free to leverage) and high-level components (eg. I think that eventually Mist and Maelstrom and whatever you call the Bitshares client should all support every underlying crypto-platform, and so browsers and protocols should compete separately).

Quote
Sure, if "accounts" are an off-chain organizational concept and not an on-chain data structure. Typically balances have distinct keys, but even two balances with the same owner keys but different assets get different balance IDs.

So this means that you're storing balance pairs of <bts, bitasset> separately for each bitasset/user combination? It would not make sense to just store <bts>, <bitasset>, <bitasset>, because then if one of the bitasset balances goes negative you have an uncollateralized debt and the owner can just run away from it.

Quote
You already trust the core developers and core community members when you download the client on the internet. These are the same kind of people who run the delegates. It requires much more trust in a community to give your private keys to software they signed off on, than to give their stakeholders control over the price feeds. It results in no net risk increase from bitcoin IMO.

Software is a 1-of-n trust model. If there's a backdoor, it only takes one person to point it out. Delegate price feeds are n/2-of-n. Now, I would argue blockchains run on the principle that n/2-of-n is an okay trust model iff your set of n is actually decentralized, and at this point I haven't researched the topic enough to see whether DPOS delegates (i) currently are, (ii) could be expected to continue to be in the future less or more decentralized than ASIC farms. Of course, my intuition is that the decentralization level of ASIC farms is not exactly a high bar to meet :)

Quote
Does he mean that all balances are freely tradeable against each other?

All I'm basically asking for is a precise description of how exactly "CFDs" are kept track of in Bitshares. Is it the case that each individual CFD is kept track of separately? Looks like the answer is no, since I got an explicit answer that CFDs have no explicit counterparty. Is it just a set of accounts which hold balances, where the bitasset balance can be positive or negative? Looks like the answer is yes, except that you're maintaining a separate on-blockchain object for each bitasset. I suppose the simplest way to answer my question might even be to implement bitassets in Serpent a la https://github.com/ethereum/serpent/blob/poc7/examples/schellingcoin/schellingdollar.se (https://github.com/ethereum/serpent/blob/poc7/examples/schellingcoin/schellingdollar.se).
Title: Re: Vitalik on stable currencies and POS
Post by: monsterer on December 29, 2014, 12:59:16 pm
...
1) We assume a trusted price feed exists
...

This is the elephant in the room.

(It's Oracles all the way down...)

It is entirely possible that without a reference, trusted price feed, tracking the value of an external entity is unachieveable. The schelling point scheme described in the paper isn't workable without a way to judge whether the betters participating in the process are right or wrong, which implies there must be a reference price.

What is interesting to me is the idea of measuring hashing power in a POW scheme (or transaction fees in POS) and using that as an internal measure of the value of the coin, thereby allowing a coin to attain its own, self contained price stability. Looking into a post fiat world, this has the potential to be quite important.

Still, as BM points out both the above idea and with an infinite printing press driving the price stability system, market manipulation might be a big problem.
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 29, 2014, 02:03:24 pm
Quote
Though I do agree that there should be more collaboration on low-level components (eg. we've done a lot of work replicating a whole bunch of crypto functions like serialization, merkle trees, erasure coding and ECDSA in 5 languages that others should feel free to leverage) and high-level components (eg. I think that eventually Mist and Maelstrom and whatever you call the Bitshares client should all support every underlying crypto-platform, and so browsers and protocols should compete separately).

If we have several blockchains that all have the same clients (and thus UX) and are all turing complete, and all have funding to copy any new feature that's invented in the space by anyone, then the only real difference between blockchains would be their liquidity (and thus market cap/volatility of the underlying base token which serves as collateral). New capital entering the system will always choose whichever system has the most liquidity.

The reason why bitcoin maximalism doesn't make sense is because it isn't turing complete and cannot be upgraded to become it.
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 03:00:25 pm
Quote
Though I do agree that there should be more collaboration on low-level components (eg. we've done a lot of work replicating a whole bunch of crypto functions like serialization, merkle trees, erasure coding and ECDSA in 5 languages that others should feel free to leverage) and high-level components (eg. I think that eventually Mist and Maelstrom and whatever you call the Bitshares client should all support every underlying crypto-platform, and so browsers and protocols should compete separately).

If we have several blockchains that all have the same clients (and thus UX) and are all turing complete, and all have funding to copy any new feature that's invented in the space by anyone, then the only real difference between blockchains would be their liquidity (and thus market cap/volatility of the underlying base token which serves as collateral). New capital entering the system will always choose whichever system has the most liquidity.

The reason why bitcoin maximalism doesn't make sense is because it isn't turing complete and cannot be upgraded to become it.

So, there are two reasons to have multiple blockchains. One is that groups will always disagree, and even within the bounds of turing-completeness there are disagreements. For example, Dan just expressed his interest (http://bytemaster.bitshares.org/article/2014/12/24/Introducing-BitShares-Object-Graph/) in having the underlying DB be a graph database instead of a key/value store, as well as having markets be a first-class structure; I think that's silly, and would prefer heaps/treaps/some kind of trees as a first-class structure and nothing else, as markets can be made out of heaps pretty easily and graph DBs can be replicated by key/value stores. Now the legitimate reason to try to make those modifications is, as Dan points out, because there's a choice of what to put at the compiled level and what to put at the interpreted level.

The second reason is scalability/fees. Users looking for a blockchain have three factors to keep in mind when choosing a chain: (i) network effect factors, (ii) security, (iii) costs. Larger chains have higher security and higher network effect factors, but higher costs because more nodes have to process every transaction. Hence, applications which benefit from security and network effects strongly should be on one chain, but apps that are lower-value and independent really should be off by themselves.

Now, our recent research has led us to conclude that scalable multichain/sharding mechanisms exist that allow all blockchains to share security to a high degree (at least for full clients; light client security is a bit more complicated) with a high degree of interop, so the only tradeoff that remains is between network effect and fees. Additionally, note that many kinds of blockchain applications are vulnerable to 51% attacks in ways other than consensus (eg. schellingcoin), so in those cases having any higher degree of shared security is superfluous. I think we'll end up seeing a highly complicated multichain setup where chains follow a power law distribution in size, with dapps that need to talk to each other a lot congregating on a few chains, and things that are mostly standalone being separate, but with inter-chain linkages for communication/trade when needed.

(As another point, at ethereum we generally don't see blockchains as being financial tools exclusively; they're more like decentralized computers that people run services on, and those services probably use tokens in a lot of places but that should not necessarily be an assumption everywhere; hence, "liquidity" is only one kind of network effect, and IMO even one of the less important ones).
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 29, 2014, 03:00:50 pm
So I went through "A Note on Cryptocurrency Stabilisation: Seigniorage Shares".   There is a place for these kinds of papers for sure, but there is so much irrelevant information in the paper that it is hard to get a summary of the basic approach.

As far as I can tell the paper is close to worthless on useful ideas for stabilizing prices.  And has inspired a new blog topic on the "fallacy of price stability"
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 03:02:29 pm
What is interesting to me is the idea of measuring hashing power in a POW scheme (or transaction fees in POS) and using that as an internal measure of the value of the coin, thereby allowing a coin to attain its own, self contained price stability. Looking into a post fiat world, this has the potential to be quite important.

Still, as BM points out both the above idea and with an infinite printing press driving the price stability system, market manipulation might be a big problem.

You should read up on my research on endogenous estimators here: https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/

It's actually quite a fun topic.
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 29, 2014, 03:03:57 pm
Quote
(As another point, at ethereum we generally don't see blockchains as being financial tools exclusively; they're more like decentralized computers that people run services on, and those services probably use tokens in a lot of places but that should not necessarily be an assumption everywhere; hence, "liquidity" is only one kind of network effect, and IMO even one of the less important ones).

This is how I understand them too.   
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 03:10:13 pm
So I went through "A Note on Cryptocurrency Stabilisation: Seigniorage Shares".   There is a place for these kinds of papers for sure, but there is so much irrelevant information in the paper that it is hard to get a summary of the basic approach.

You can find a summary of the basic approach here: https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/

Quote
As far as I can tell the paper is close to worthless on useful ideas for stabilizing prices.  And has inspired a new blog topic on the "fallacy of price stability"

Be careful here. A lot of Austrian economists (eg. Mises back when I was reading Human Action) like to make the point that the very concept of price stability is somehow philosophically invalid, which is an absolutely absurd position; even if you cannot use pure logical theory to determine that there is one particular price benchmark that is "correct" and all others are wrong, it is very clear that you can intuitively say that product prices in general go up and down much more when measured in some currencies than in others. But that's not the point you were planning to try to make, looking forward to hearing it.
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 29, 2014, 03:25:40 pm
Quote
Now, our recent research has led us to conclude that scalable multichain/sharding mechanisms exist that allow all blockchains to share security to a high degree (at least for full clients; light client security is a bit more complicated) with a high degree of interop, so the only tradeoff that remains is between network effect and fees.

Sidechains also solve higher fees. You can have more centralized and highly liquid sidechains with low fees, and highly decentralized chains with high fees. This can still all be done with the same basic token.

Quote
(As another point, at ethereum we generally don't see blockchains as being financial tools exclusively; they're more like decentralized computers that people run services on, and those services probably use tokens in a lot of places but that should not necessarily be an assumption everywhere; hence, "liquidity" is only one kind of network effect, and IMO even one of the less important ones).

Why would someone run a non-financial service on a decentralized computer? Seems highly inefficient for everything that doesn't require absolute security and trust. Anyway, as I see it price is the single most important and reliable signal in a market, and will be what everything else follows. Bitcoin mindshare also peaked at the ATH. If a company decided to integrate their services onto a blockchain (risking their business and thus their money), they'll always be a lot more comfortable with a blockchain that they can easily see a lot of other people have been willing to risk their money with (indicated by high price and high liquidity).
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 03:37:14 pm
Quote
Sidechains also solve higher fees. You can have more centralized and highly liquid sidechains with low fees, and highly decentralized chains with high fees. This can still all be done with the same basic token.

I think you're making the same type-theory error that just about every Bitcoin maximalist does: conflating blockchains and currencies. The questions of:

1. Should all crypto be done on one blockchain?
2. Should all crypto be done on one currency?

are completely separable. Sidechains are a way of using one currency but using multiple blockchains; hence if we go the BTS/ETH/whatever sidechain route then we are still going the multi-blockchain route, just not a multi-token route. Metacoins, and some versions of Ethereum contracts, are a way of using many currencies but still being on one blockchain.

Sidechains by themselves are not magically secure. If a sidechain as currently described is only used by a few people, then it will be easy to double-spend. The challenge of scalability is not how to split up the applications - that's easy - it's how to split things up while maintaining a high degree of security for each piece. Sidechains do nothing in advancing this frontier, because they are a currency innovation and not a blockchain innovation.

Quote
Why would someone run a non-financial service on a decentralized computer? Seems highly inefficient for everything that doesn't require absolute security and trust.

Name registries for one. Tracking ownership of smart property devices as well. If they become really cheap, we could even start talking about decentralized forums and the like. People already write such software in python, which is a >1000x efficiency hit over assembly, so it's not at all unreasonable that people will value decentralization enough to take a ~200x hit in efficiency for them, particularly since the blockchain only needs to store a small business-logic core.
Title: Re: Vitalik on stable currencies and POS
Post by: monsterer on December 29, 2014, 03:45:58 pm
You should read up on my research on endogenous estimators here: https://blog.ethereum.org/2014/11/11/search-stable-cryptocurrency/

It's actually quite a fun topic.

Thanks - I've just taken a glance at it.

I would like to see an analysis from the POV of the profit motivated market manipulator in systems such as seignorage shares (and indeed bitshares). Particularly, I'd like to see a thorough analysis of the way each system responds to manipulation attacks in the presence of an idealised attacker (one who knows the nuances of each system and is motivated by profit alone).
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 29, 2014, 04:00:50 pm
Quote
Name registries for one. Tracking ownership of smart property devices as well.

But these kind of things require a lot of trust in the system. The best way to evaluate trust in a blockchain will always be to look at its market cap. People wouldn't register their names or put their car on litecoin if they could the same thing on bitcoin.

I agree with your token vs blockchain premise. I guess the real question is, which token is used to designate and pay the salary of block producers? If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain, then you can always trust all sidechains maintained by them as much as you can trust the primary blockchain (I think...).
Title: Re: Vitalik on stable currencies and POS
Post by: fluxer555 on December 29, 2014, 05:00:33 pm
I'd like to point out arhag's DPOS side-chain solution here, since it's lost in the deep 'Proposals' section of the 'BitShares' section...

https://bitsharestalk.org/index.php?topic=11349.0
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 06:41:37 pm
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 29, 2014, 06:44:55 pm
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/

My side change approach has exactly 101 delegates that handle ALL chains.   You only have one set of trusted individuals that come to a common consensus.  The only purpose of side chains is to allow parallel processing of transactions which cannot possible invalidate each other. 

Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 06:50:24 pm
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/

My side change approach has exactly 101 delegates that handle ALL chains.   You only have one set of trusted individuals that come to a common consensus.  The only purpose of side chains is to allow parallel processing of transactions which cannot possible invalidate each other.

Right so I dislike that because it requires there to be 101 nodes that process all transactions, and that leads to rather high levels of centralization and eventually croaks if the blockchain architecture gets popular enough that you simply can't do everything that people want to do on a single server or data center. Also note that if a new delegate gets elected, downloading the database is going to take them a long time. That's why I strongly prefer, as Dominic Williams puts it, "scaling out, not up".
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 29, 2014, 06:52:49 pm
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/

My side change approach has exactly 101 delegates that handle ALL chains.   You only have one set of trusted individuals that come to a common consensus.  The only purpose of side chains is to allow parallel processing of transactions which cannot possible invalidate each other.

Right so I dislike that because it requires there to be 101 nodes that process all transactions, and that leads to rather high levels of centralization and eventually croaks if the blockchain architecture gets popular enough that you simply can't do everything that people want to do on a single server or data center. Also note that if a new delegate gets elected, downloading the database is going to take them a long time. That's why I strongly prefer, as Dominic Williams puts it, "scaling out, not up".

It wouldn't all have to run on one machine.  The technology can scale.   The time to sync-up is a "ONE TIME COST".   Users don't ever have to download the full chain.   

Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 29, 2014, 07:11:03 pm
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/

My side change approach has exactly 101 delegates that handle ALL chains.   You only have one set of trusted individuals that come to a common consensus.  The only purpose of side chains is to allow parallel processing of transactions which cannot possible invalidate each other.

Right so I dislike that because it requires there to be 101 nodes that process all transactions, and that leads to rather high levels of centralization and eventually croaks if the blockchain architecture gets popular enough that you simply can't do everything that people want to do on a single server or data center. Also note that if a new delegate gets elected, downloading the database is going to take them a long time. That's why I strongly prefer, as Dominic Williams puts it, "scaling out, not up".

It wouldn't all have to run on one machine.  The technology can scale.   The time to sync-up is a "ONE TIME COST".   Users don't ever have to download the full chain.

My concern with this is that it means that even if it can scale architecturally, you're exposing yourself to a lot of political centralization. Particularly, I predict that if delegates get anywhere near as large as you are suggesting, you'll see the equivalent of "delegate pools": 3-5 large entities that actually maintain and update the state, and then individual delegates that simply point to those entities and that are there basically only as a way of voting on who the revenue should go to. It's possible to set up such a delegate pool that is anonymous to connect to, so delegates would have the incentive to secretly repoint themselves to that pool as they can easily avoid being caught. And if you manage to stop this from happening, then you're creating a large barrier to entry to the delegate industry, to the point where they're not much more decentralized than modern corporations.
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 29, 2014, 07:16:58 pm
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/

My side change approach has exactly 101 delegates that handle ALL chains.   You only have one set of trusted individuals that come to a common consensus.  The only purpose of side chains is to allow parallel processing of transactions which cannot possible invalidate each other.

Right so I dislike that because it requires there to be 101 nodes that process all transactions, and that leads to rather high levels of centralization and eventually croaks if the blockchain architecture gets popular enough that you simply can't do everything that people want to do on a single server or data center. Also note that if a new delegate gets elected, downloading the database is going to take them a long time. That's why I strongly prefer, as Dominic Williams puts it, "scaling out, not up".

It wouldn't all have to run on one machine.  The technology can scale.   The time to sync-up is a "ONE TIME COST".   Users don't ever have to download the full chain.

My concern with this is that it means that even if it can scale architecturally, you're exposing yourself to a lot of political centralization. Particularly, I predict that if delegates get anywhere near as large as you are suggesting, you'll see the equivalent of "delegate pools": 3-5 large entities that actually maintain and update the state, and then individual delegates that simply point to those entities and that are there basically only as a way of voting on who the revenue should go to. It's possible to set up such a delegate pool that is anonymous to connect to, so delegates would have the incentive to secretly repoint themselves to that pool as they can easily avoid being caught. And if you manage to stop this from happening, then you're creating a large barrier to entry to the delegate industry, to the point where they're not much more decentralized than modern corporations.

Unlike with PoW, stakeholders can actually prevent pools from forming. One of the clearest trends you'll see at the moment is that everyone are very careful with supporting only delegates that are clearly individual people and hosting their delegates seperately (with riverhead I think being the only exception). There will always be more than enough money ready to compensate a delegate whatever amount they need to cover their hosting costs and then some. It's not supposed to become an industry like mining, it's more like the top nodes in a big web of trust. You only ever need to replace delegates if they lose their reputation in the web of trust (which for instance could be by doing something stupid that centralises the network).
Title: Re: Vitalik on stable currencies and POS
Post by: fluxer555 on December 29, 2014, 07:17:39 pm
Sounds like bytemaster and Vitalaik should duke it out on the next Mumble session :)
Title: Re: Vitalik on stable currencies and POS
Post by: Empirical1.1 on December 29, 2014, 07:23:00 pm
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/

My side change approach has exactly 101 delegates that handle ALL chains.   You only have one set of trusted individuals that come to a common consensus.  The only purpose of side chains is to allow parallel processing of transactions which cannot possible invalidate each other.

Right so I dislike that because it requires there to be 101 nodes that process all transactions, and that leads to rather high levels of centralization and eventually croaks if the blockchain architecture gets popular enough that you simply can't do everything that people want to do on a single server or data center. Also note that if a new delegate gets elected, downloading the database is going to take them a long time. That's why I strongly prefer, as Dominic Williams puts it, "scaling out, not up".

It wouldn't all have to run on one machine.  The technology can scale.   The time to sync-up is a "ONE TIME COST".   Users don't ever have to download the full chain.

My concern with this is that it means that even if it can scale architecturally, you're exposing yourself to a lot of political centralization. Particularly, I predict that if delegates get anywhere near as large as you are suggesting, you'll see the equivalent of "delegate pools": 3-5 large entities that actually maintain and update the state, and then individual delegates that simply point to those entities and that are there basically only as a way of voting on who the revenue should go to. It's possible to set up such a delegate pool that is anonymous to connect to, so delegates would have the incentive to secretly repoint themselves to that pool as they can easily avoid being caught. And if you manage to stop this from happening, then you're creating a large barrier to entry to the delegate industry, to the point where they're not much more decentralized than modern corporations.

Unlike with PoW, stakeholders can actually prevent pools from forming. One of the clearest trends you'll see at the moment is that everyone are very careful with supporting only delegates that are clearly individual people and hosting their delegates seperately (with riverhead I think being the only exception). There will always be more than enough money ready to compensate a delegate whatever amount they need to cover their hosting costs and then some. It's not supposed to become an industry like mining, it's more like the top nodes in a big web of trust. You only ever need to replace delegates if they lose their reputation in the web of trust (which for instance could be by doing something stupid that centralises the network).

Yeah, unlike Bitcoin centralisation which Bitcoin holders have no say in. I think BTS shareholders will maintain a market acceptable level of decentralisation via voting and as the system matures will require various forms of proof that delegates have & are running their own full systems.
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 29, 2014, 07:39:04 pm
Sounds like bytemaster and Vitalaik should duke it out on the next Mumble session :)

Ethereum should just merge with us already :P

Give their community 10-20 100% delegates to pay their developer salary and inflate out stake that they can sharedrop to their ICO investors over time according to some social consensus (since they are a group of stakeholders we definitely want on board!). Then they can help develop whichever multi-blockchain system is best and then make ethereum the BTS blockchain for scripted smart contracts. Everyone wins and every group of stakeholders gain immediate returns from the massive spotlight that will shine on the BTS-Ethereum behemoth (that the ethereum investors can instantly begin to gain liquid shares in from the moment of the announcement).
Title: Re: Vitalik on stable currencies and POS
Post by: onceuponatime on December 29, 2014, 08:00:14 pm
Sounds like bytemaster and Vitalaik should duke it out on the next Mumble session :)

Ethereum should just merge with us already :P

Give their community 10-20 100% delegates to pay their developer salary and inflate out stake that they can sharedrop to their ICO investors over time according to some social consensus (since they are a group of stakeholders we definitely want on board!). Then they can help develop whichever multi-blockchain system is best and then make ethereum the BTS blockchain for scripted smart contracts. Everyone wins and every group of stakeholders gain immediate returns from the massive spotlight that will shine on the BTS-Ethereum behemoth (that the ethereum investors can instantly begin to gain liquid shares in from the moment of the announcement).

You are not taking into account human egos. Just because something would be more profitable/more efficient doesn't mean that everyone will be able to overcome their needs to be the "winners". Neither Vitalik nor Dan are in sole charge of their projects and so, despite their ability to act rationally, the entire projects may not be able to do so.
Title: Re: Vitalik on stable currencies and POS
Post by: Troglodactyl on December 30, 2014, 04:21:31 am
Honestly, given the nature of open source and how far they seem to have converged already, I expect the tech will largely merge regardless.

The question is whether the communities and developers will waste energy reproducing efforts and squabbling with each other, or if they'll explicitly cooperate.  At least Vitalik and Dan seem to be off to a relatively good start.
Title: Re: Vitalik on stable currencies and POS
Post by: Riverhead on December 30, 2014, 05:15:30 am
All cars are basically the same: Mostly they have four wheels, an engine, a steering wheel, brakes, etc. However no one would argue, rationally, that all automotive companies should merge. The diversity of needs and desires of the market supports different approaches to the same problem.

The crypto space needs to be the same to avoid dieing to group think. While I don't support the open hostility common between competing crypto technologies the competition for market share is good for everyone.
Title: Re: Vitalik on stable currencies and POS
Post by: santaclause102 on December 30, 2014, 05:39:19 am
All cars are basically the same: Mostly they have four wheels, an engine, a steering wheel, brakes, etc. However no one would argue, rationally, that all automotive companies should merge. The diversity of needs and desires of the market supports different approaches to the same problem.

The crypto space needs to be the same to avoid dieing to group think. While I don't support the open hostility common between competing crypto technologies the competition for market share is good for everyone.
I think so too. Also Innovation in this space will not end for a long time and there will be different systems that will suit different demands better than others.

But friendly cooperation is a valuable thing in any case.

Title: Re: Vitalik on stable currencies and POS
Post by: werneo on December 30, 2014, 06:05:18 am
Sounds like bytemaster and Vitalaik should duke it out on the next Mumble session :)

Ethereum should just merge with us already :P

Give their community 10-20 100% delegates to pay their developer salary and inflate out stake that they can sharedrop to their ICO investors over time according to some social consensus (since they are a group of stakeholders we definitely want on board!). Then they can help develop whichever multi-blockchain system is best and then make ethereum the BTS blockchain for scripted smart contracts. Everyone wins and every group of stakeholders gain immediate returns from the massive spotlight that will shine on the BTS-Ethereum behemoth (that the ethereum investors can instantly begin to gain liquid shares in from the moment of the announcement).

You are not taking into account human egos. Just because something would be more profitable/more efficient doesn't mean that everyone will be able to overcome their needs to be the "winners". Neither Vitalik nor Dan are in sole charge of their projects and so, despite their ability to act rationally, the entire projects may not be able to do so.

 +5%

A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)
Title: Re: Vitalik on stable currencies and POS
Post by: Riverhead on December 30, 2014, 06:12:56 am
Sounds like bytemaster and Vitalaik should duke it out on the next Mumble session :)

Ethereum should just merge with us already :P

Give their community 10-20 100% delegates to pay their developer salary and inflate out stake that they can sharedrop to their ICO investors over time according to some social consensus (since they are a group of stakeholders we definitely want on board!). Then they can help develop whichever multi-blockchain system is best and then make ethereum the BTS blockchain for scripted smart contracts. Everyone wins and every group of stakeholders gain immediate returns from the massive spotlight that will shine on the BTS-Ethereum behemoth (that the ethereum investors can instantly begin to gain liquid shares in from the moment of the announcement).

You are not taking into account human egos. Just because something would be more profitable/more efficient doesn't mean that everyone will be able to overcome their needs to be the "winners". Neither Vitalik nor Dan are in sole charge of their projects and so, despite their ability to act rationally, the entire projects may not be able to do so.

 +5%

A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)

Well played :).
Title: Re: Vitalik on stable currencies and POS
Post by: jsidhu on December 30, 2014, 07:04:20 am
If the block producers of all bitshares sidechains are paid in BTS and voted in with BTS on the primary bitshares blockchain

So, there are fragility risks that you have to keep in mind here. Particularly, if you allow anyone to apply to specifically become a delegate of any blockchain, then an attacker can take over 80 delegates on sidechain #173, then repeatedly move BTS from that sidechain to other sidechains and double-spend themselves, all before getting voted out.

Additionally, there's the issue that after the fact the only way to tell which history actually came first after the fact is by looking at centralized providers (blockchain.info, etc), so you're actually implicitly moving back to a fully subjective Ripple consensus model. Of course, your ideology may be that Ripple-level subjectivity (which is much greater than traditional PoS weak subjectivity) is fine, but you should be aware of this.

Now, if you require people to apply only to be a delegate generally, and then randomly assign delegates to sidechains, and add cross-channels between individual sidechains so that cross-sidechain transactions don't need to all go through the master chain, then you've actually basically reinvented https://blog.ethereum.org/2014/10/21/scalability-part-2-hypercubes/

My side change approach has exactly 101 delegates that handle ALL chains.   You only have one set of trusted individuals that come to a common consensus.  The only purpose of side chains is to allow parallel processing of transactions which cannot possible invalidate each other.

Right so I dislike that because it requires there to be 101 nodes that process all transactions, and that leads to rather high levels of centralization and eventually croaks if the blockchain architecture gets popular enough that you simply can't do everything that people want to do on a single server or data center. Also note that if a new delegate gets elected, downloading the database is going to take them a long time. That's why I strongly prefer, as Dominic Williams puts it, "scaling out, not up".

It wouldn't all have to run on one machine.  The technology can scale.   The time to sync-up is a "ONE TIME COST".   Users don't ever have to download the full chain.

My concern with this is that it means that even if it can scale architecturally, you're exposing yourself to a lot of political centralization. Particularly, I predict that if delegates get anywhere near as large as you are suggesting, you'll see the equivalent of "delegate pools": 3-5 large entities that actually maintain and update the state, and then individual delegates that simply point to those entities and that are there basically only as a way of voting on who the revenue should go to. It's possible to set up such a delegate pool that is anonymous to connect to, so delegates would have the incentive to secretly repoint themselves to that pool as they can easily avoid being caught. And if you manage to stop this from happening, then you're creating a large barrier to entry to the delegate industry, to the point where they're not much more decentralized than modern corporations.

I can see how individuals vote will be worth alot more that any coin or token in the system as it should be. The will to act freely and apply that in the form of a vote to come to a consensus backed by a mathematical framework is invaluable. It will tie into dans thoughts on a voilence free society which punishes those that buy votes coercively. In the end I expect large entities to provide honest growth with no hidden agenda as it would be alot harder to hide it in an open blockchain framework.

The consensus of the drivers of the "economy" will find an equilibrium between central yet important authoritive, financial or social figures and the free hands of everyone else chipping in.

The whales with more voting power will see their power decrease as more coins are earned at the same time providing innovation to better all.
Title: Re: Vitalik on stable currencies and POS
Post by: CryptoPrometheus on December 30, 2014, 07:12:27 am
All cars are basically the same: Mostly they have four wheels, an engine, a steering wheel, brakes, etc. However no one would argue, rationally, that all automotive companies should merge. The diversity of needs and desires of the market supports different approaches to the same problem.

The crypto space needs to be the same to avoid dieing to group think. While I don't support the open hostility common between competing crypto technologies the competition for market share is good for everyone.

Necessity is the mother of Invention, and competition is the reason for necessity. If there is no competition, there is less reason to innovate. And innovation is badly needed to free humanity from the current centralized power structures. Ergo, the more competition, the better!
Title: Re: Vitalik on stable currencies and POS
Post by: Pheonike on December 30, 2014, 07:49:01 am
All cars are basically the same: Mostly they have four wheels, an engine, a steering wheel, brakes, etc. However no one would argue, rationally, that all automotive companies should merge. The diversity of needs and desires of the market supports different approaches to the same problem.

The crypto space needs to be the same to avoid dieing to group think. While I don't support the open hostility common between competing crypto technologies the competition for market share is good for everyone.
Automakers do share a lot of components such as engines and gas caps. They recognize that's its a waste if resources to have  50 versions basic components such as gas caps, windshield wipers , etc.

http://www.caranddriver.com/columns/platform-sharing-for-dummies-feature
Title: Re: Vitalik on stable currencies and POS
Post by: kisa on December 30, 2014, 12:30:40 pm
BIT-HERIUM or ETH-SHARES?  :P
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 30, 2014, 01:41:06 pm
BIT-HERIUM or ETH-SHARES?  :P

I'm afraid one of the two is already taken (http://gavintech.blogspot.ca/2014/06/bit-thereum.html).
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 30, 2014, 02:01:16 pm
Quote
A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)

I could live with this. Ethereum doesn't really make sense as the name of a protocol, but it works great as the name for the overall ecosystem. It's actually an issue I've been thinking about because I think it's so significant that all of bitshares put together forms a single "thing", but this "thing" doesn't really have a name. Usually it's described as "the bitshares ecosystem" or "the bitshares community", but those are not actual names, they just describe it. Bitshares and the blockchain itself is going to become such a huge part of the future that it deserves a proper name like a country or a planet. I was thinking Omega, for the lesswrongesque superintelligence. Ethereum is a nice name too.
Title: Re: Vitalik on stable currencies and POS
Post by: nomoreheroes7 on December 30, 2014, 02:06:51 pm
Quote
A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)

I could live with this. Ethereum doesn't really make sense as the name of a protocol, but it works great as the name for the overall ecosystem. It's actually an issue I've been thinking about because I think it's so significant that all of bitshares put together forms a single "thing", but this "thing" doesn't really have a name. Usually it's described as "the bitshares ecosystem" or "the bitshares community", but those are not actual names, they just describe it. Bitshares and the blockchain itself is going to become such a huge part of the future that it deserves a proper name like a country or a planet. I was thinking Omega, for the lesswrongesque superintelligence. Ethereum is a nice name too.

Yup, let's do this. Where do we start?

8)
Title: Re: Vitalik on stable currencies and POS
Post by: Rune on December 30, 2014, 02:32:37 pm
Quote
A marketing solution: Ethereum has received major media coverage. It is a more developed brand name than "BitShares". So -- the hypothetical merged system would be called "Ethereum".  ;)

I could live with this. Ethereum doesn't really make sense as the name of a protocol, but it works great as the name for the overall ecosystem. It's actually an issue I've been thinking about because I think it's so significant that all of bitshares put together forms a single "thing", but this "thing" doesn't really have a name. Usually it's described as "the bitshares ecosystem" or "the bitshares community", but those are not actual names, they just describe it. Bitshares and the blockchain itself is going to become such a huge part of the future that it deserves a proper name like a country or a planet. I was thinking Omega, for the lesswrongesque superintelligence. Ethereum is a nice name too.

Yup, let's do this. Where do we start?

8)

First we wait until ethereum is actually out and working. Then copy it if it seems valuable. Then hire their team and reward their shareholders if we feel confident in its future value.
Title: Re: Vitalik on stable currencies and POS
Post by: yellowecho on December 30, 2014, 06:25:03 pm
First we wait until ethereum is actually out and working. Then copy it if it seems valuable. Then hire their team and reward their shareholders if we feel confident in its future value.

I've heard the devs say in the past that developing a BitShares-tuned turing complete scripting language would likely be better method than simply copying it.

IMO the only thing BitShares needs to worry about regarding Ethereum is the network effect.  If it can gain users faster than BitShares can develop similar market-demanded functionality than it could be trouble... otherwise BitShares is golden  8)
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 30, 2014, 06:56:02 pm
http://bytemaster.bitshares.org/article/2014/12/31/Stable-Crypto-Currencies-are-Impossible/
Title: Re: Vitalik on stable currencies and POS
Post by: Pheonike on December 30, 2014, 07:33:54 pm

Typo

"wealth transfer to miners which waist most of it in the mining process"


Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 30, 2014, 07:35:15 pm

Typo

"wealth transfer to miners which waist most of it in the mining process"

Fixed, thanks.
Title: Re: Vitalik on stable currencies and POS
Post by: clayop on December 30, 2014, 07:38:00 pm

Typo

"wealth transfer to miners which waist most of it in the mining process"

This reminds us "proof of waist" lol
Title: Re: Vitalik on stable currencies and POS
Post by: jsidhu on December 30, 2014, 08:59:21 pm
http://bytemaster.bitshares.org/article/2014/12/31/Stable-Crypto-Currencies-are-Impossible/

Love it  +5%
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on December 30, 2014, 10:18:12 pm
http://bytemaster.bitshares.org/article/2014/12/31/Stable-Crypto-Currencies-are-Impossible/

Okay, so...

Quote
It is also widely accepted among many crypto-currency fans that the FED has failed at their mandate because of persistent rise in prices resulting in the dollar losing 99% of its purchasing power since the FED was founded in 1913

Okay fine, create a currency pegged to the consumer price index.

Quote
The goal of price stability at its heart is the same as Price Fixing and this is a well known economic fallacy that crypto-currencies should avoid.

The reason why price fixing is an economic fallacy is that in the real world you do not have a magic lever to increase the supply or demand for a product. If the natural market rent is $4000 and you set a legal rent ceiling at $2500, then due to decreasing supply and increasing demand you will have a shortage of rent, and there's nothing you can do to force extra supply to emerge at that price. However, this argument specifically does not apply for currencies. With currencies, you control the supply. Hence, assuming a simplified formula price ~= supply/demand, if you fix the price then all you need to do is constantly adjust supply to equal demand. Robert Sams' seignorage shares shows how to do this just fine.

Quote
Governments around the world are constantly changing how they calculate the basket and what items are included. They will do things like exclude food and energy along with stocks and real estate. John Williams maintains a website called “Shadow Government Statistics”

Ahh, shadowstats. I think it gets pretty nicely debunked here: http://azizonomics.com/2013/06/01/the-trouble-with-shadowstats/

Quote
The idea that any currency could exist and maintain stable purchasing power through a nuclear war is insane.

Agree. But I don't see why such a high threshold needs to be a requirement.

Quote
From the perspective of someone holding a coin, positive and negative interest rate changes are identical to price volatility.

The key difference is that positive and negative interest in SchellingDollar exists in small quantities and only for as long as needed until traders reallocate their holdings to make profit via arbitrage. One can literally set a maximum and minimum interest rate of +/-10% annually, and the scheme would still work fine. The reason why this is possible is that the stable coin is a zero-total-supply asset, and so any level of cash holding preferences is compatible with any price level; in a finite supply asset, on the other hand, price is proportional to cash holding preferences.

Quote
Any approach that provides unlimited liquidity at a fixed price is vulnerable to market manipulation attacks.

Sure, so if those kinds of attacks prove to be a problem, then provide liquidity on an increasing fee schedule. No big deal. Or we could just go back to Robert Sams' auctioning approach.

Quote
Predictable vs Stable... It seems to me that what people really want from a “stable” crypto-currency is reduced volatility.

Well yes, that's exactly what I mean by "stable" and why I think stability is useful to people. What else did you think I meant?

Quote
If we think about the “ideal money” it would be widely accepted with 0% growth in supply.

I think you'll find most economists would disagree on you on that point. Particularly non-Austrian economists (http://econfaculty.gmu.edu/bcaplan/whyaust.htm)

Quote
In my opinion, gold and silver, should be physical money and a crypto-currency should attempt to peg to gold and silver. In this way we can free all of society from the centralized control of fiat currency issuers and keep inflation limited to what gold and silver miners can produce.

Please dear god no, gold is an environmental tragedy (http://www.brilliantearth.com/gold-mining-environment/) that uses proof-of-waste for its supply expansion algorithm. I would rather have BTS be the universal money than subsidize gold's price a single dollar more.

Also, as a final comment, all of the attacks against the US government in that post are irrelevant. Neither bitassets nor schellingdollar nor any other proposed mechanism is (1) controlled by any kind of Fed, (2) necessarily needs to be imbued with the explicit goal of 2-4% inflation, as opposed to a non-inflationary strategy like CPI pegging or heck even shadowstats pegging, and (3) has profits somehow leaking into a shadowy financial elite - everyone can own shares/volcoins and take part in any profits that the scheme may end up generating. It is wrong to extend criticism of existing centralized monetary policy into criticism of the very concept of monetary policy at all.
Title: Re: Vitalik on stable currencies and POS
Post by: arhag on December 31, 2014, 12:04:20 am
+5% to many of the points in Vitalik's post above.

And although I am interested in a BitCPI, I still am not at all confident about it as a long term solution (when everything is priced in BitCPI). Perhaps it is just the ideal bridge currency necessary until the saturation stage at which point BTS itself (or the volcoin to use SchellingDollar nomenclature, even though at that point I don't think it would really be volatile) could be the universal money. Vitalik, what are your thoughts on how a price stable currency could work (or maybe not work) at the limits of worldwide adoption (particularly when goods/services worldwide are priced in the BitAsset or stablecoin)?

I think BitUSD and even more so BitCPI are great during the growth stage of BitShares, but perhaps something different must eventually be done. My guess is that BTS itself eventually becomes the low volatility (at that future point) currency that everyone uses. It would still inflate and deflate according to global economic conditions, but would happen over large enough time scales that everyone would find it acceptable to use as a currency. BitAssets would still exist for speculating on commodities and other assets, but would not be used to create the supply of the world reserve currency.

Another possibility is a BitCPI (with a initial collateral and margin call limit close to 100% allowing for large leverage) that has a built in 5% inflation in its definition, but also has yield with a cap of up to 10% per year. This could create a "stable" asset that has +/- 5% p.a. value change flexibility to allow for the necessary amount of inflation/deflation so that the underlying BTS can still support its value even in the saturation stage. Still not 100% sure how the price feeds would work, but perhaps using the one-hour moving average from the internal exchange modified up/down over time by price measurements entering the blockchain could work well. I think I prefer the solution in the previous paragraph more.
Title: Re: Vitalik on stable currencies and POS
Post by: nz on December 31, 2014, 12:11:11 am

Typo

"wealth transfer to miners which waist most of it in the mining process"

This reminds us "proof of waist" lol
I can vouch for proof my waist as mine expanded a few extra inches over christmas.  :-\
Title: Re: Vitalik on stable currencies and POS
Post by: logicalgrackle on December 31, 2014, 04:56:01 am
http://bytemaster.bitshares.org/article/2014/12/31/Stable-Crypto-Currencies-are-Impossible/

The argument against pegging to a stable value seems to be that the statistics to determine stable value aren't widely agreed upon, so such a pegged asset would fail to attract a market. This is clearly false. Economists broadly agree that the government's methodology for calculating inflation are sound. Some disagree, but they make political objections, not objections that are backed by reasoned arguments in academic papers.

But it doesn't matter. Either of us could be wrong. The only way to find out is to build the price feed, launch the asset, and see if people use it. I plan on doing this, and I hope people join me to help refine the methodologies for building a feed that credibly prices stable value over time.
Title: Re: Vitalik on stable currencies and POS
Post by: jsidhu on December 31, 2014, 05:34:45 am
If seignorage is fixing price and adjusting supply inflation I dont see it working.. It creates incentive to  dry up M2.. And will end up in a feedback cycle where the currency will lose "trust" the most important thing in a market instrument. Its like peercoin with lower rewards once hashrate drops.. However creates the wrong incentive.

Infact dynamically adjusting supply based on stats is doomed for failure.. The most important thing is confidence and predicability brings about confidence. If we know that there will be x amount of inflation per year and it will increase or decrease if i vote for this developer or lack thereof then its an easier to understand system that will result in supply demand equlibrium resulting in what I call a "happy consensus".. In other words ask 10 guys.. Synical, laidback, nerds whatever which one will pass the test when asked what do you think about the inflation strategy for x currency? I think the non statistical approach will place higher on the spectrum of what people actually want and are happy with.

Todays shadow stats are a great example of why stats dont work in reasoning monetary base inflation. Regardless of if they are warranted, I mean the fact that they exist and so many people believe in them.
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on December 31, 2014, 04:12:31 pm
http://bytemaster.bitshares.org/article/2015/01/01/How-to-create-a-stable-decentralized-crypto-currency/
Title: Re: Vitalik on stable currencies and POS
Post by: theoretical on December 31, 2014, 04:19:33 pm

http://bytemaster.bitshares.org/article/2015/01/01/How-to-create-a-stable-decentralized-crypto-currency/

Amazing.  This article is from the future.
Title: Re: Vitalik on stable currencies and POS
Post by: kisa on December 31, 2014, 04:22:51 pm

http://bytemaster.bitshares.org/article/2015/01/01/How-to-create-a-stable-decentralized-crypto-currency/

Amazing.  This article is from the future.
+5%

@Dan, even on New Year's eve you work like a highly efficient blog-writing machine! ;)
Happy New Year to you - we all wish that 2015 becomes great year for BitShares!
Title: Re: Vitalik on stable currencies and POS
Post by: fluxer555 on December 31, 2014, 04:24:31 pm
2nd Paragraph:

"For all practical purposes a the dollar is ..."


3rd Paragraph, last sentence:

"and can be sold and the market price within 30 days."
Title: Re: Vitalik on stable currencies and POS
Post by: Troglodactyl on December 31, 2014, 04:36:16 pm
2nd Paragraph:

"For all practical purposes a the dollar is ..."


3rd Paragraph, last sentence:

"and can be sold and the market price within 30 days."

Also sited -> cited.

Pull requested.

EDIT: Liked the post, btw.
Title: Re: Vitalik on stable currencies and POS
Post by: werneo on December 31, 2014, 04:42:21 pm
2nd Paragraph:

"For all practical purposes a the dollar is ..."


3rd Paragraph, last sentence:

"and can be sold and the market price within 30 days."

Also sited -> cited.

Pull requested.

EDIT: Liked the post, btw.

last sentence of the first paragraph:

Quote
pegging to a fiat currency isn’t decentralized nor stable.

Double negative. Should be, "isn't centralized or stable."
Title: Re: Vitalik on stable currencies and POS
Post by: fluxer555 on December 31, 2014, 05:34:18 pm
Double negative. Should be, "isn't centralized or stable."

Alternatively,

"pegging to a fiat currency isn’t decentralized nor is it stable."

Also, loved the article!!
Title: Re: Vitalik on stable currencies and POS
Post by: jsidhu on December 31, 2014, 06:46:19 pm
Tying in prediction market to a cpi like indiciator...  +5%

This takes the best of both worlds.. tying inflation to an indicator and not having that indicator based on stats.. everyone agrees because they are part of the prediction consensus!

"and which ever entity is responsible for estimating inflation would be completely in control of monetary policy"

Should be every not ever
Title: Re: Vitalik on stable currencies and POS
Post by: vlight on January 01, 2015, 09:20:57 pm
http://bytemaster.bitshares.org/article/2015/01/01/How-to-create-a-stable-decentralized-crypto-currency/
Quote
Based upon this analysis the goal of BitShares is for BTS to become a global currency in its own right and for the dilution that we experience today to fund development to taper off until we have a fixed supply

rip BTSX

This is no longer a currency, it's shares. Isn't it up to shareholders to decide whether to dilute BTS?
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on January 01, 2015, 09:39:35 pm
http://bytemaster.bitshares.org/article/2015/01/01/How-to-create-a-stable-decentralized-crypto-currency/
Quote
Based upon this analysis the goal of BitShares is for BTS to become a global currency in its own right and for the dilution that we experience today to fund development to taper off until we have a fixed supply

rip BTSX

This is no longer a currency, it's shares. Isn't it up to shareholders to decide whether to dilute BTS?

It is... but by the time it gets to be a global "currency" trx fees will be more than enough.
Title: Re: Vitalik on stable currencies and POS
Post by: Empirical1.1 on January 02, 2015, 01:26:57 am
I'm not great with economics but to me while this looks like an interesting academic exercise, there’s low/no market value in StableCoin short to medium term.

Ethereum will already have risk attached and this new StableCoin system even more so. The downside of being a StableCoin early adopter is you could lose a lot and the upside is that if it works you just get to maintain your relative purchasing power. So you will probably be required to pay a lot of interest to attract any demand. Especially when limited crypto-currencies and currently suppressed gold/silver, exposure to which is available via BitAssets give people currency options that are likely to explode in relative purchasing power if there’s significant problems with the global financial system and major fiat currencies.

Purchasing power stability is also relative to specific countries based on their economic situation and government policies. So even if you achieve a greater degree of average global stability you will be locally unstable over long periods so any marginal benefit you may ideally achieve over current options will be in practical terms largely negated. 

In terms of pricing goods, people are looking at their expenses which are currently priced in national currencies. So if you’re working on tight margins & budgets that’s the kind of stability and predictability you’re after which is available via BitCurrencies. Any deviations the StableCoin makes to a currency people are working in, (provided it's not very inflationary - then anything else is better) will be a negative to this market. 

So from my POV StableCoin is unstable at a local level  & unstable for businesses even if it works while being high risk for very limited reward.  Unlike BitAssets, the system will require years to prove it’s efficacy to the market. I also think it's quite likely that after years of work, StableCoin will just be seen as an alternative to a CPI or commodity basket ETF.

Gold historically functions very well both in terms of volatility and stability when adopted on a large scale in a currency role & referencing the volatility of gold now that it has been demonitised is quite misleading imo. When this fiat system implodes, gold will take on a significant monetary role again and clearly many countries are preparing for that outcome. Few will place their trust in anything other than limited money after that event imo and certainly not a new oracle/prediction market.  A low/no dilution crypto-currency may grow very rapidly in this period and one day perform a similar role to a monetised gold if it gets large & widely used enough. Due to crypto-currency transparency and accountability, it's even possible it may ultimately be viewed as superior to gold and be very beneficial to mankind. So that's where I think the future is. (BitGold, BitSilver and low/no dilution cryto-currency. BitUSD and other BitCurrencies will be very popular in the interim.)

 
Title: Re: Vitalik on stable currencies and POS
Post by: Pheonike on January 02, 2015, 01:39:58 am
+%5
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on January 02, 2015, 01:20:32 pm
Quote
They exclude entire asset classes that have experienced the greatest inflation (stock market)

Well, the CPI is supposed to exclude the stock market, that makes sense. The point is to estimate cost of living. Stocks are not a living expense, they are an investment. To put it another way, imagine two parallel universes where in universe A dividends didn't exist and buybacks are used and in B buybacks don't exist and dividends are used. Both universes are libertarian utopias so no tax considerations exist. A and B are economically equivalent as Dan has pointed out many times, but A will have higher stock market rate growth than B, so the stock-market-included CPIs of the two would be different, which makes no sense.

Quote
They fail to account for economic growth that would normally lead to falling prices

I'm confused about what this actually means. Can you elaborate?

Quote
They are fully centralized and lack a consensus process.

Sure, that's reasonable.

Quote
t is undesirable because we want the average individual to be able to “invest in the economy” simply by saving the money of the economy without having to take any risks.

So, you want there to exist an easy-to-use investment vehicle that corresponds to "investing in all of society". Makes sense. But why not just make an easy button for simultaneously investing in every stock in proportion to its market cap? We already have basically that in the form of the S&P500 and the like.

The basic macroeconomic reason not to have a fixed-supply asset simultaneously be an store-of-value, medium-of-exchange and unit-of-account is so that if a recession hits and the SoV becomes a safe haven asset you don't have the MoE and UoA getting screwed up as well.
Title: Re: Vitalik on stable currencies and POS
Post by: kisa on January 02, 2015, 03:09:56 pm
Quote
They exclude entire asset classes that have experienced the greatest inflation (stock market)

Well, the CPI is supposed to exclude the stock market, that makes sense. The point is to estimate cost of living. Stocks are not a living expense, they are an investment. To put it another way, imagine two parallel universes where in universe A dividends didn't exist and buybacks are used and in B buybacks don't exist and dividends are used. Both universes are libertarian utopias so no tax considerations exist. A and B are economically equivalent as Dan has pointed out many times, but A will have higher stock market rate growth than B, so the stock-market-included CPIs of the two would be different, which makes no sense.


I recently reflected on the topic whether asset inflation should be a component of price inflation indexes, and I believe there is a strong case for inclusion. When buying into an ever rising (and substantially rising) stock market the expected long-term investment returns deteorate significantly, compared with a range-bound or slowly rising stock market. This implies that the cost of ensuring decent pension income is rising dramatically for the younger population, who started to invest comparably late. Pension income is going to be high for older folks, who will sooner tend to spend it, therefore creating some upward pressure on consumer prices. Younger folks have to withdraw consumption now, in order to save enough in a low expected return environment, but for them pension savings are definitely a part of their  "living expenditures". So, on both fronts - in terms of leading to future upward consumer price pressures, and in terms of representing the current cost of living, asset prices should not be ignored!
Title: Re: Vitalik on stable currencies and POS
Post by: bytemaster on January 02, 2015, 09:23:14 pm
Quote
They exclude entire asset classes that have experienced the greatest inflation (stock market)

Well, the CPI is supposed to exclude the stock market, that makes sense. The point is to estimate cost of living. Stocks are not a living expense, they are an investment. To put it another way, imagine two parallel universes where in universe A dividends didn't exist and buybacks are used and in B buybacks don't exist and dividends are used. Both universes are libertarian utopias so no tax considerations exist. A and B are economically equivalent as Dan has pointed out many times, but A will have higher stock market rate growth than B, so the stock-market-included CPIs of the two would be different, which makes no sense.




I recently reflected on the topic whether asset inflation should be a component of price inflation indexes, and I believe there is a strong case for inclusion. When buying into an ever rising (and substantially rising) stock market the expected long-term investment returns deteorate significantly, compared with a range-bound or slowly rising stock market. This implies that the cost of ensuring decent pension income is rising dramatically for the younger population, who started to invest comparably late. Pension income is going to be high for older folks, who will sooner tend to spend it, therefore creating some upward pressure on consumer prices. Younger folks have to withdraw consumption now, in order to save enough in a low expected return environment, but for them pension savings are definitely a part of their  "living expenditures". So, on both fronts - in terms of leading to future upward consumer price pressures, and in terms of representing the current cost of living, asset prices should not be ignored!

http://bytemaster.bitshares.org/article/2015/01/03/Should-stocks-be-included-in-the-CPI/
Title: Re: Vitalik on stable currencies and POS
Post by: santaclause102 on January 02, 2015, 11:01:41 pm
The basic macroeconomic reason not to have a fixed-supply asset simultaneously be an store-of-value, medium-of-exchange and unit-of-account is so that if a recession hits and the SoV becomes a safe haven asset you don't have the MoE and UoA getting screwed up as well.
Why should the MoE and the UoA be screwed (what does "screwed" mean here?) in case of a recession. I assume by recession you mean that the productivity goes down and everyone tries to get hold of the SoV (SoV as Dan described it). Do you mean that the deflation would change prices too much so that the SoV would not fulfill its function as a MoE and a UoA anymore?
If I interpreted that right I would argue that it comes down to how people perceive money and what they expect form it. Dan's position that a price stable currency is unsustainable long term is reasonable to me. Therefore price stable money with the UoA function as implied by you might not be something that people could want if there was no externalizing of costs by a state. I guess people want a price stable money (-> UoA as implicitly defined by you) because they are used to it but do not see the long term negative effect it has.

To me the all interesting question is how exactly debt based money and the structural necessity for the circumstance that "the rich (the lenders) are getting richer and the poor (the borrowers) are getting poorer to a degree where the poor can not pay back the debt" are connected. "The poor" in the statement above mostly equal the tax payers since the state is the biggest borrower.

If the state/the FED has the stated goal of price stability (let's assume 0% inflation; inflation here in the sense that the same money buys the same basket of goods) and the economy grows to some degree then there will be inflation in the sense of an increase in money supply at the rate the economy grows (given the fed can estimate eco. growth accurately). So everyone would be better of under these circumstances to invest the money into the growing economy instead of holding it.

Now there are two reasons why "the rich get richer and the poor get poorer": 1) The "rich" have more resources to invest better than the the investors they compete with (more education, time, connections/inside knowledge, the the ability to hold assets for a long time / no need to cash out to buy food/housing etc., scalability effects of capital (paying someone to invest for you is more efficient with more money)). 2) The inflation of the money supply equals debt of the government which is very likely to result in the self-reinforcing "the rich get richer effect" because any state where the people are uneducated about the trade off decisions of their government (including the impossibility to realize those trade offs for the voter / public due to the complexity of decisions) and/or where particularistic interests rule the state and/or where costs can be socialized is likely to increase the debt to a degree (this is now the case in US/EU/JP I strongly guess) where it is not possible anymore to pay back the debt because the the ratio of interest rates on government debt, the height of the debt and the economic growth (also compared to other developing markets that grow stronger and have better returns for the investor) has gotten out of balance (momentarily covered by issuance of new debt/money). And since the tax payers are the indirect borrowers of the government debt they suffer in the end.

The dramatic implication of debt based money - like with any case where the majority of wealth is debt although I can only imagine government issued debt based money to lead to such a system wide circulation of debt (can you think of other circumstances that produce that much debt aside from bailout protected bank issued money?) - is that it creates a system wide necessity to make profits at ANY costs for humans and the environment to pay back the debt and it corrupts governments to favor economic growth even if it is at odds with protecting public goods which is one of the basic functions a state has.

Conclusion: Money issuance and monetary policy should not be a function of a state.

Here are two related quotes from the two articles that I find essential:
Quote
With debt based money price deflation often means the collateral behind the debt is falling in value and that the borrowers will have a harder time earning the money required to pay off the debt.

Quote
If you make the currency a “constant purchasing power” then the average man ends up having to make investment decisions he is not qualified to make.

https://blog.ethereum.org/2014/12/31/silos/
I highly appreciate your vote for diversity and recognizing that diversity and friendly cooperation are not contradictory. I would go further and say that anyone with a mindset that does not allow for separation with respect to how different people perceive the world (especially within the own peer group (the world, crypto, bitshares/ethereum)) is advocating absolutism and despotism. The difference in how we perceive the world can become an evidence for that we are all the same in our core (we have the same basic needs).
Title: Re: Vitalik on stable currencies and POS
Post by: vbuterin on January 15, 2015, 09:17:10 pm
Why should the MoE and the UoA be screwed (what does "screwed" mean here?) in case of a recession. I assume by recession you mean that the productivity goes down and everyone tries to get hold of the SoV (SoV as Dan described it). Do you mean that the deflation would change prices too much so that the SoV would not fulfill its function as a MoE and a UoA anymore?

By "screwed" I mean the following chain of events:

1. Recession hits. People get scared of business, pile into "safe" assets, ie. the SoV
2. SoV price goes up
3. MoE/UoA price goes up at the same time as a consequence, leading to expensive consequences like having to renegotiate wages, prices being out of whack for a time, debts becoming unexpectedly unsustainable, etc.

So basically yes.