Even if it breaks that one, I bet that we can find two other points on the chart that will define a long term uptrend that still supports the price. 

Wait, are you saying that there is an Authority that the bitcoiners must trust?  

You must be referring to the The Shrem Karpelès & Friends Foundation, and/or Gavin Andersen who works for it, as the source of the Red Button upgrade B. But why do you presume that an entity that has Sergei "Ponzi King" Mavrodi and Brock "RealCoin" Pierce on board, as well as many of the big miners, would not side with the big miners' cartel?  How can you be sure that Gavin will not be employed by the cartel at the time?

The Red Button threat may serve to protect the user's interests against miner abuse, if it is credible.  However, actually carrying out that threat would be extremely damaging to the users, because it would inevitably split the coin and cause the total price to drop.  Whoever calls for rebellion and releases that code will not be "protecting the users interests", but telling them to sacrifice their money for the sake of the PoIotPUGTiiaGI (Principle of Inviolability of the Protocol Unless Gavin Thinks it is a Good Idea).

Perhaps the Red Button solution should be renamed "the Jim Jones solution"?

You meant 12.5 rebelBTC per block.  (It is the ex-bitcoin miners who will earn 25 cartelBTC per block.)  But it doesn't matter.

Correction: until the electricity and equipment costs are Pr*1800 $/day, where Pr is the market value of the rebelBTC coin; that is, at most (Pr/Po)*75 MW, where Po is the BTC price before the cartel's announcement.  Even if the rebel's bitcoin were to retain the full value of the old bitcoin, that would be only 75 MW.  But it doesn't matter, either.


Well, the cartel will want to be the first in that line.  As soon as John Connor releases the rebel mining code, the SkyNet cartel will download it and set some rented CPUs to the task of jamming the rebel blockchain (and warn users that it will be doing that).  The cartel will keep increasing their CPU power as needed, so as to retain a majority of hashpower in that chain too.  So, the users who upgrade their wallet software to the rebel protocol will not be able to use their coins; and any opportunistic miners who try mining the rebel chain will get nothing.  This attack may cost the cartel a lot of money, but the stake for them is half a million dollars a day for 2 years, so they will try all they can to preserve the value of their coin. How long will it be, before the rebel users and miners give up?

(By the way, I meant that the cartel can rent cloud computing, not cloud mining as it its usually understood.)

Note also that, since the goal of pressing the Red Button is to destroy the value of bitcoin, the cartel could also justify the jamming of the rebel chain as an action to save bitcoin by preventing the disastrous split; and call for all good bitcoiners to come to the help of their cause, by cooperating in the jamming.

But it doesn't matter either.

I hope you kept reading my post beyond the first half, specifically beyond this sentence: "But let's say that a substantial number of users do join the rebel ranks, and the cartel leaves the Red Button chain alone, or fails to jam it."

Note that the effect of the Red Button would be to create a new crypto, the rebelBTC, that is a cloned copy of the original Bitcoin (oldBTC), including its state.  Namely, every owner of N oldBTC receives a gift of N rebelBTC, sitting in the same address of the rebel blockchain, which is accessed with the same private key.  Meanwhile, the cartel will give N cartelBTC to the same user, in the cartel's blockchain, while blocking further use of the oldBTC.  From that point on, each copy of each original satoshi can be hoarded, sold, spent, or burned independently of the other copy.

(For example, the USMS will suddenly find themselves owning 94'000 rebelBTC and 94'000 cartelBTC, as well as 94'000 oldBTC that they cannot move because of the cartel's jamming.  They could auction each separately or (more likely) bundle them together in lots of (say) 2000 rebelBTC plus 2000 cartelBTC.  In this second case, they would need to duplicate each transaction request for both chains as they deliver the coins to the winning bidders.)

The point is that the Red Button does not "steal" the users from the cartel's chain.  It does not even give the unhappy users the option of taking their BTC out of the cartel chain and into the rebel chain.  All bitcoin users would become users of both coins.

So the cartel chain will continue to have all the bitcoin users, as well bitcoin's 500 PH/s network; whereas the rebel chain will have all the users but only a nascent CPU network.  

This would be a very interesting experiment.  Has this ever happened before -- somebody creating an altcoin that duplicates bitcoin's protocol and its state, namely a persistent fork of the bitcoin blockchain?

The first question is what will happen to the prices Pc and Pr of the two coins, cartelBTC and rebelBTC, and how would they compare to the price Po of bitcoin before the split.  It seems unlikely that Pc + Pr will be more than Po. (If that were the case, people would rush to press the Red Button now, without waiting for any attack!)  Most likely, some of the old value would be lost, and the rest would be split between the two chains; so that Pr + Pc << Po.  

The next question is how the remaining value will be split between the two chains.  That depends on the credibility of the two coins in the eyes of prospective buyers (bitcoiners and non-bitcoiners).  If the cartel sets out to jam the rebel chain, and manages to keep it jammed for sufficiently long time, then Pr will soon be zero.  Since normal users will see no diffrence between oldBTC and cartelBTC, Pc will probably retain a significant fraction of Po. (I would guess Pc will be almost equal to Po, actually; but I know that I live in a fantasy world where bitcoiners care more about their money than about the ancap ideals.).


As I said before, I am not predicting anything.  You and other people claimed that a miner cartel cannot force a change in the protocol.  I tried to show that it can, by providing a step-by-step plan that they could follow.  That plan would obviously work, just as it always works for any cartel that can deny an essential service to its customers.  But that would be an unpleasant fact, so you prefer to believe the fantasy that the 300 Spartan bitcoiners would rally at Gavin's call in a suicidal stand against the army of Persian money-chasers…

If Gavin could really do that, then who would put money into bitcoin?

Next Christmas, maybe?

So, they should be ignored because they set the price? 

Could you please post a worked-out example of how that fake-trade-plus-arbitrage would move the price?

Freudian slypo / pun of the month:

Why is it that this thread keeps coming back to this question?

(Is this your "technical objection"?)

You are assuming that 2 million bitcoin users would all rather upgrade to the "rebel" chain and start mining on their own CPUs rather than accept the cartel's proposed change to the protocol.  (Can you see the "belief about how the community would react" there?)  It is like saying that if the banks decided to raise their fees, all their clients would take their cash out and create a banking system of their own, out of their garages and kitchens.

But let's say that all users were to feel like that.  First, the number "2 million" depends on who you count as "bitcoin user". (I gather that the number of full nodes is less than 10 thousand, isn't that so?)

As of last september, there were only 650'000 bitcoin addresses in the blockchain with at least 0.1 BTC in them; and less than 160'000 with at least 1 BTC in them.  Addresses are not people, of course, and many people who own bitcoins keep them all in MtGOX Bitstamp Coinbase or some such place; but wouldn't you agree that someone who has more than a uh-tried-it-once interest in bitcoin should have at least one blockchain address of his own with at least 1 BTC in it?

So, if we take that criterion as a cutoff, we are talking about 200'000 real users at most.  Now, how many of them would have the knowledge, time, patience, and computing resources to downlad the "Red Button" mining code and start mining?  How many will put up with the extra load on their PCs and laptops to secure their 2.73 BTC?  10% maybe? ("belief about how the community would react" again…)

So, even if most of the users hate the cartel and choose to upgrade their wallet software to the Red Button protocol, there may be perhaps only 20'000 PCs and laptops mining the rebel chain.  At (guess) 300 W per machine devoted to mining, 24/7, that would be 6 MW securing the Red Code fork.  If the cartel wanted to jam it too, how much cloud computing power would it need to rent to match their Red Button hashing power, and how much would it cost?

But let's say that a substantial number of users do join the rebel ranks, and the cartel leaves the Red Code chain alone, or fails to jam it.  So then there would be two two competing and incompatible coins, SunniCoin and ShiaCoin, both claiming to be the real Bitcoin.

One coin uses practically the same protocol, with a small change to the halving schedule, and claims to have a large state-of-the-art mining network comprising all former bitcoin miners (mostly turned off at present, because of the lower coin value would probably negate the doubled reward).

The other runs a protocol that is mostly similar to Satoshi's, but is incompatible with all mining equipment, and has a much smaller network (whether measured in MW, or in CPU computing power).

Everyone who owned N bitcoins right before the split, whether he likes it or not, would own N SunniCoins and N ShiaCoins just after the split.  However, the two blockchains would inevitably diverge, therefore transactions in one cannot (and should not) be automatically mirrored in the other.  Indeed, those users who are not absolute purists will hoard, sell, or spend both coins independently, for whatever price each would fetch.  To do that, they would have to duplicate their bitcoin wallet at the time of the split, and install both versions of their wallet software.  Most users will probably do that eventually (the alternative is pure loss), unless one of the coins dies out first.

Note that both coins will start out with the same set of owners, so neither can boast of having most of the users.  A user who wants SunniCoin to die can only  refuse to be paid in SunniCoin, and spend, sell, or burn all his SunniCoins.  So, paradoxically, if most users want ShiaCoin to flourish, there will be a surge of traffic in the SunniCoin blockchain, and vice-versa.  

How would prospective crypto investor choose between the two?  If someone was looking for a venture to invest his retirement money, which would he choose: a restaurant in Donetsk, or an apparel store in Northern Iraq?
 
Obviously both coins will see their price collapse, and their combined marketcap will be much less than the bitcoin marketcap before the split.   It is as if bitcoiners woke up one day to find that each bitcoin they owned had been swapped for one Litecoin plus one Dogecoin.

So, the RedCoin solution would be a near suicide by the users, even if they had support for their coin in all payment processors and other services.  It would break the trust in both coins, not only among ideologues, but also among the majority of the "materialistic" users.  Large holders, fund investors, the service companies, and the VC investors who put their money into them would together lose a billion dollars or more.  Ditto for any other solution that splits the blockchain into two independent chains.

Now rewind the movie to before the split.  You own an exchange or a payment processor.  You must decide whether to come out in favor of the cartel, or of the announced rebellion, or just avoid taking sides.  In any case, you must handle the two future forks as two distinct coins.  If you do not want to take sides, you should provide support in your service for both coins, each with its own set of accounts (and its own ledger, order book, or whatever).  Note that each bitcoin that your clients had deposited will become one SunniCoin and one ShiaCoin, both under your control.

The alternative is to provide support for only one of the coins, in an attempt to push your clients towards it.  But if you provide support only for ShiaCoins, you must still let your clients withdraw their SunniCoins, otherwise you would be stealing them.

Now, if most of the bitcoin users submit to the cartel, your losses will be minimal, assuming that you provide support in your service for the cartel's coin.  In any other case, you will lose millions of dollars, even if you provide support for the rebel's coin.  What would you do?

I have less information than anyone who trades there.  (Is the fee really 1%?)

It does not matter whether a payment (fee, purchase, deposit…) is in BTC or in dollars.  Its value is best measured in dollars, converting BTC at the current market rate.  How that amount is kept after the payment can be considered a separate decision by the person who received the amount.  

That is, if Autumn pays Brock in BTC,  and Brock keeps them as BTC for some time, it is the same as if Autumn had sold the BTC, given the dollars to Brock, and Brock has immediately bought back the BTC.

Um, eyeballing the charts, it seems that they had ~90 kBTC/week of trade volume since Nov/2013; about 60 weeks.  Guessing an average price of 600 $/BTC, that would be 3.2 billion $ of total trades in that period. If they charge 1% trading fees (guessing; what is the right number?), that would be 32 million $ of revenue in that period, or almost 30 million $/year.

That explains why they got the 10 M $ investment.  (It does not explain why they would need such investment.)

But their revenue is falling, now about 60 kBTC/week at less than 300 $/BTC.  That is ~80 M$/month of trade volume, 800'000 $/month of revenue from 1% fees

However, we do not know whether they charge the same fee from all customers.  If their moms trade at Bitstamp, maybe they are exempt from fees. 

Perhaps because some people like forks, some like spoons?

Yes, I was trying to understand what the SC proposal was all about.  Seems it is the fable of the elephant and the blind men, so I gave up on that for now.  But the motivation, at least for some people, seems to be a way to save bitcoin from some risk.  The discussion went into 51% attack, so I posted my understanding about that.  I did not see any technical objections to what I wrote, only different beliefs about how the community would react.  Well, each one is entitled to their opinion on that.


Oh, thank you.


Well, I am 64, I am not a Beatles' song, I do not have regular hours, it is school vacations, and I have a big pile of exams to grade.  And I noticed that someone was wrong on the internet.


I would appreciate that, thank you.  

Last time I checked (several months ago) they were physically in Slovenia but registered in UK in some guise.  Has that changed?

Minor exchange in Slovenia offlne for a day, Chinese short-term speculators do not care. 

I spent 10 days in Plzen and Prague, many years ago.  I learned one phrase in Czech, something like "Please get in or off the train, the doors are about close"  Maybe I will recall it later...  prosím … u výstup a nástup …  maybe...

Any chance they will grill him about the avatars?

My flash plugin is broken, I will try to watch later today.

I forgot the word 'evenly' before 'distributed'.   (I used it elsewhere when saying that same condition.)
Is that why you did not understand the logic?

(I don't recall whether I replied to that here or on reddit.)  The "Red Button" solution is the third option that, in my summary above, each user would have: upgrade to a different protocol that the cartel miners cannot mine.

That option is a suicide only for the rebel users, since all the miners, whether they like the change or not, would be forced to abandon the rebels and join the cartel ranks.  The rebel users would then find themselves in a new altcoin, with a fourth blockchain (4)  that wuld not use the bitcoin protocol, supported by a minuscule CPU/GPU mining network.  Their rebelBTCs would not be accepted by users or services who converted, and they would not be able to receive cartelBTCs from them.  


Unless I missed something, in the plan that I outlined the cartel will earn both cartelBTC and rebelBTC rewards throughout the transition.  Depending on the outcome of the attack they will lose one of the two, but the other is still double what they would earn by fair play.

The rebels could try to take revenge from the cartel by stealing their rewards, but they could do that only in the rebel altcoin.



The bitcoin industry will surely choose the fork that is expected to have most users.   The cartel fork will have all the miners and 500 PH/s (say) of hash power.  Rebel users will be unable to use the network for days until they upgrade to the red button version; while users who give in to the cartel will not suffer any inconvenience.  The design of the economic game part of the protocol has always assumed that the players are greedy and will choose their behavior so as to maximize their immediate gain; but that would make them switch immediately to the cartel version.  The network has always been controlled by the miners, only that now the power is concentrated in half a dozen companies.  

I am not predicting that the next halving will be postponed.  That plan I described is an example of how a 51% cartel can force a change of protocol, presented in response to claims that a 51% "attack" cannot do that.

A similar plan could be used tomorrow by the top 4 miners to, say, reverse the last halving and restore the reward to 50 BTC/block.  (But of course this change would cause a lot more commotion.  By 2016 people hopefully will have accepted the fact that the miners do rule the network.  )


Well, I described a plan for a protocol-change "attack" and pointed out the options, incentives, and risks that each player would have.  Some people expressed their beliefs about how the players would react to a different attack (and called them facts).  I disagreed.

I understood that empty blocks do not cost more to mine than normal blocks, and pay the 25 BTC reward just like them.  Isn't this true?  (Transaction fees are still negligible -- less than 20 BTC/day, compared to 3600 BTC/day for rewards.)

According to the script I described, the cartel does not need to increase its hashing power during the transition, and does not
lose the block rewards, whether it succeeds or fails in the attempt.


Users who do not upgrade will have their bitcoins blocked for as long as the cartel wants to.  Meanwhile, users who upgrade early will not even notice the transition, and those who upgrade after the deadline will immediately recover access to their coins.


Why? Objectively, it would be as if Satoshi himself had written "2018" instead of "2016" in the reward halving schedule.

Do you mean that it would show that the protocol is not resistant to change, as many believe?  But, unless there is a flaw that I still can't see, the plan could succeed.  So bitcoin is already useless?


Exactly.

It is not "one miner".  It is 51% of the haspower having decided to do something that will bring millions additional revenue to all miners.

And that is precisely why the 51% attack is a problem: because 51% of the hashpower may be just one miner, and yet that miner WILL prevail against all the others.  That is a fundamental feature of the protocol.  When it was designed, it was called "one CPU, one vote instead of one man, one vote", and it was believed that the difference between those two concepts would not be significant.  Now we have seen that the two are vastly different.


As I have pointed out several times, users can reject blocks, but cannot create them; only miners can.  The users do not own the mining equipment, the miners (obviously) do.  So the millions of users can scream and cuss as much as they want, but they cannot control or harm the miners, not even deny them the block rewards.  Even if all the users reject all the blocks that the miners mine, they will not be able to interact with other users, or get any transactions in the blockchain, if the miners will not serve them. And a cartel that has 51% of the hashpower can close the network to all competing miners, and to all millions of users who are using the current protocol, whatever that is.  Even if the users try to mine with their CPUs, they will not have enough hashpower to get through the cartel's jamming.  Is any of these statements wrong?

When the banks get together and decide to raise some fee, their millions of users may scream and cuss as much as they want, but cannot stop the banks from doing that.  Some rebel users may take their cash out, and perhaps try to create their own informal banks; but most users would continue using the banks, because they would rather pay the extra fee than do without their services.  That is reality.  Why do you think that bitcoin users and bitcoin miners would behave differently?


But that is not how a 51% cartel can jam the honest chain.  Read my outline, PLEASE.

What difference would the bet make?

I am not claiming that my hunch about the future is better than you faith.  I am not making predicitons.  As I already said, the survival of the network and the price of BTC are not the issue. 

I claimed that the bitcoin protocol does not provide a decentralized p2p payment scheme.  That should be obvious from the fact that 51% of the hash power is controlled by a handful of companies.  Mining is now centralized; that is a fact.

People have retorted that it is not really centralized because the piechart changes over time; or that GHash was forced to shrink.  Do I need to explain again why those facts are irrelevant?

People have claimed that a 51% cartel could not do anything except jam the network.  That is false, it is well known that they can do many nasty things besides just jamming. 

People claimed that a 51% cartel cannot do harm because the users decide which blocks are valid, so the miners cannot do anything against the will of the majority of the users.  That is false, and I explained why.

I observed that an entity that can jam a process can force users to accept changes to that process.  In particular, I observed that a 51% cartel can force a change in the protocol.  People denied that based on (1) implicit assumptions the cartel would try to do only "attacks" of a certain type, (2) statements of faith about how users and other miners woud react to such attempts and (3) claims that the users and miners who objected to the attack could prevent the change.  So I described in detail a plausible "attack" that did not fit those assumptions, pointed out that most miners (even those outside the cartel) would want the change and would cooperate with the cartel, and that users would submit to the change because it would not harm them directly, whereas rebellion could. And showed why the rebellious users and miners would not be able to stop the change.

So, where would my bet fit in the above?  Or my profession, or my IQ?