1. Centralization should be the last resort, not decentralization. If you can do something decentralized then you should, unless you can't.

This does not take account of costs, which fall into two categories: decision-making costs and outcome costs.

Just as total centralization can result in very low decision-making costs and very high outcome costs, so can a requirement for unanimity result in very high decision-making costs and very low outcome costs. With pure centralization, a tyrant can render decisions at will, regardless of how the new rules affect everyone else. With pure unanimity, no one has to worry about a new rule being passed that one might not like, but only those rule changes that everyone can agree on would pass and holdouts could seek advantages by threatening to be uncooperative.

Pure decentralization is similar to a unanimity rule, in that every participant must be polled on every decision. The degree to which a system fails to be purely unanimous is the degree to which that system is centralized.

Even Bitcoin does not have that. The vast majority of the holders of bitcoins have no say in which version of the blockchain is the correct one. That power is held by relatively few mining pools, and bitcoiners fret approximately twice each year that this or that pool might control 51% of the hashing power and hijack the system.

A purely decentralized blockchain management system would require that all of the wallets that hold bitcoins have access to the network at all times and participate in the confirmation of all transactions, and that an attacker must control 100% of the hashing power, in order to hijack the system. Such a system would grind to a halt.

The choice between centralization xor decentralization is a red herring. The optimal voting scheme is the one that minimizes the total of both kinds of cost, and generally is some kind of interior solution that defines a quorum as somewhere between one and all.

We already have a highly centralized world...

And yet, we don't. There is no central world government, and if there were there's no guarantee that it would be in control in any but the broadest sense. Throughout most of the world, people go about their days, governed largely by internal senses of fair play rather than 1984-esque surveillance and enforcement. Far from having a watchman on every street corner, a much more common complaint is that you can never find a cop when you need one.

Russians just seized Crimea, while Ukrainians stood impotently by. There is no central authority to stop this sort of thing. Even after US military personnel were involved for more than a decade, Afghanistan and Iraq remain disorderly.

Drugs are widely available in US prisons, which are the epitome of centralization.

...and while centralization can be more efficient in situations where a resource is scarce and decision making must be made quickly such as with military hierarchy...

Even in military encampments, a lot of stuff gets lost, and a lot of individuals engage in behavior that is forbidden. The phrase "the fog of war" is a synonym for disorder.

...most of what we are dealing with is information and information is not scarce. We aren't ever going to run out of information, so to centralize is actually damaging as it concentrates the risk around those points of centralization.

As someone above points out tongue-in-cheak, in a finite universe, information is scarce, although on a human scale the quantity of potential information is vast. Setting aside the finite quantity of energy that makes up the universe, the very abundance of information that makes it seem as if it were infinite makes it very costly to test every scenario and require that every satoshi contribute the same amount of hashing power to the Bitcoin network at all times, in order to ensure that there is absolutely no possible way that any kind of subtle collusion has led to falsified blockchain records.

Decentralization is not cost-free.

BitShares mentioned on pp.37-38.

https://s3-us-west-2.amazonaws.com/chainbook/Great+Chain+of+Numbers+A+Guide+to+Smart+Contracts%2C+Smart+Property+and+Trustless+Asset+Management+-+Tim+Swanson.pdf (Warning: PDF)

I don't live in the USA, so I'm not familiar with the laws there, but I don't understand how bitcoin can be seen as property.

Bitcoin is owned by no one, the keys to the network are found and free. Although the keys allow manipulation of corresponding entries on the public digital ledger, there is no real "ownership" involved. It just so happens that people are more easily convinced to operate in your favour with the help of money, but that favourable position is not your personal property. As I see it.

I think all the analogies with gold have come back to bite the bitcoin-users.

Tax officials in many countries are treating the units that the digits in software wallets represent as things that have value.

The accounting for holdings of PTS, BTS, etc. is pretty straightforward, and now anyone operating in the USA has had a major source of uncertainty removed.

Quote from: CWEvans on March 22, 2014, 03:01:54 pm

Basically, the insured is betting that he or she will suffer some cost. Insurance works, because the cost is something the people will tend to avoid, like broken bones, wrecked cars, and such.

In the scenario above, the investors are betting that the insured are excessively pessimistic.

Isn't that what insurance companies do? They hope to collect more in premiums than they payout in claims. If you end up with reserves and the premium to payout ratio is more than 1, the "investors" or owners of the insurance company make a profit.

Agencies do something similar where they pool their premiums together and those who have less than a certain percentage of the premiums in claims get a profit and those who exceed the threshold get nothing. They are spreading the risk amongst more agencies for a better chance at steady profit.

If the insurer has fixed costs of anything greater than zero, then it must collect more in premiums than it pays out in claims.

The goal here is not so much to compete head-to-head with AIG, Allianz, or Allstate within OECD member states, as to bring risk mitigation to some of the six billion who live Developing World countries, and to those within OECD members states who do not have access to certain kinds of insurance.

My personal interest in this involves vendor credit guarantees.

It will be very interesting to see which regulators try to shovel back the tide, and which will adapt to this crazy new decentralized game of Whack-a-Mole.

I just felt a disturbance in The Force, as if 1 million long-term Bitcoin hoarders just updated their income tax returns.

Details at Business Insider.

hehe

"Don’t give your shares away to the miners and pump and dump geniuses" ?

General public has a positive connotation to me... What made it sound bad to me was the slightly greedy subtext:  Don't give anything to the public give it all to us! Doesn't make you trust that "us"....

Would a riff on OverkillCoin to make this point be over the top?