Bitcoin forks: Money for nothing, sex for free

[JackRab]

@johnarb, yes I see where you're going.

It's a centralized vs de-centralized discussion where de-central has it's validity in that the system runs because the checks are done on the basis of incentives, creating a trust because you assume that the majority of checks are done by non-fraudulent computing power only interested in that incentive vs a breakdown of the system when the majority will be done by fraudulent computing power that's interested in altering the ledgers... The aim is that the majority which oversees the system is non-fraudulent.

Without an incentive... there's only fraudulent computing power that aims to enrich themselves...?

So, I read somewhere that the majority of computing power comes from a few large groups of Chinese miners...? Where's the guarantee that they won't collude?

PS, my remark of "it's just a tool"... I meant that for any currency... fiat, crypto... any.... in the end it's just a tool, real assets are what will always be around.

 

[johnarb]

"Without an incentive... there's only fraudulent computing power that aims to enrich themselves...?"

The answer to this was recorded on the very first block of the bitcoin blockchain called the genesis block which contains the headline from The Times "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".

If you have this original newspaper, it is worth a lot of money due to its collectible value.

Bitcoin was started by Satoshi due to a distrust of the central bankers and the corrupt financial system where the bankers who caused a financial collapse are rewarded and the common folks are punished as the currencies are devalued through massive printing.

"So, I read somewhere that the majority of computing power comes from a few large groups of Chinese miners...? Where's the guarantee that they won't collude?"

This is a multi-part answer. The blockchain is immutable and the current block height is 492,449 which have created over 16,655,000 bitcoins in existence. In the beginning, the block reward was 50 bitcoins per mined block, then 25, then currently 12.5 bitcoins per block mined by the miner. The first part to your answer is that anything before block 492,449 cannot be changed (i.e. immutable).

The miners have control of the blocks going forward, and if the Chinese are the majority, they can collude and will solve most of the future blocks. They do now, but different Chinese mining pools. They are rewarded 12.5 bitcoins each block, plus the fees that are also considerable $ value. Having the majority of hash power, they can perform a double-spend, so say one of the executives bought a car at a dealer and wanted to keep the bitcoins, he would tell all his miner friends to mine a block that sends his bitcoins back to his wallet address. Now, I'm not sure how feasible this is, because when dealing with transactions amounting to the car value, you would not be accepting 1 block confirmation and would need at least 6 blocks. At any rate the double spend would fail and he would get no car, but the bitcoin network would be aware of this attack and the degree of its success. As word spreads, the trust in the trustless system would collapse and the monetary value of bitcoin would crash.

All of this because a Chinese miner wanted to double spend. By the way, a mining pool that exceeded the 51% hash power voluntarily reduced their hashing power (see reference below)

This is why game theory works so well in the bitcoin decentralized system. Now, all the forks that are going on now are very complicated and are being played by different groups (developers, foundation, miners) and I won't even pretend I have an idea what's going to happen in the near future, but the network will know which one is the true bitcoin. It's part of the decentralized and trustless nature of bitcoin.

http://www.investopedia.com/terms/1/51-attack.asp

 

[JackRab]

I did lots of game theory based practical tests back in Uni... fun to be part of. You could earn real money by participating, and depending on the choices everyone made... you made more or less than average... sometimes nothing. The best part was when you did the non-social thing and opted for the "I want more" option and basically got 4 or 5x average... That meant that usually others got much less.

The people studying economics/finance usually got way above average and the psychologist/social studies people got less... I wonder why...

Good explanation on the control part of blockchain, thanks for that.

 

[johnarb]

I did lots of game theory based practical tests back in Uni... fun to be part of.

The people studying economics/finance usually got way above average and the psychologist/social studies people got less... I wonder why...

Good explanation on the control part of blockchain, thanks for that.

You're welcome.

"It was Christmas 1914 on the Western Front.
Despite strict orders not to chillax with the enemy, British
and German soldiers left their trenches, crossed No Man's Land,
and gathered to bury their dead, exchange gifts, and play games. "

http://ncase.me/trust/

 

[JackRab]

You're welcome.

"It was Christmas 1914 on the Western Front.
Despite strict orders not to chillax with the enemy, British
and German soldiers left their trenches, crossed No Man's Land,
and gathered to bury their dead, exchange gifts, and play games. "

http://ncase.me/trust/

And yet it lasted another 4 years... only to rinse and repeat 20 years later...

 

[Hoi]

Bitcoin will come crashing down. Wish I could short it.. I think everyone is underestimating the grip of president Trump and are friends at the federal reserve.

You underestimate the power of Decentralized Systems.
Besides that: the USA isn't that important anymore, especially not in this case.

Asia (China and Japan for now) will lead where Bitcoin is going. They already have 75% of the market:

 

[Hoi]

So, I read somewhere that the majority of computing power comes from a few large groups of Chinese miners...? Where's the guarantee that they won't collude?
.

You are correct that due to China's access to cheap energy as well as to Chip-foundries, china grew in the past years to a centralized mining-Hub. But as always: if there is an incentive others will join the competition. Currently, Japan is entering hugely this space (and they have the technology to built their own Chips).

 

[Hoi]

About the Mining Incentives: they are with current prices, more than 4 billion a year without fees (for only the Bitcoin market, other coins have huge incentives as well). So quite lucrative to develop and produce a more energy-economic Bitcoin-mining chip.

 

[sprstpd]

If you had to come up with a new currency, would you create one that requires the consumption of huge amounts of energy for it to work properly til the end of time? As much as I find bitcoin interesting, this seems like a fundamental flaw.

 

[Hoi]

If you had to come up with a new currency, would you create one that requires the consumption of huge amounts of energy for it to work properly til the end of time? As much as I find bitcoin interesting, this seems like a fundamental flaw.

We discussed that before, and concluded that the current banking/financial system still uses much more Energy and other resources than Crypto (just calculate the amount of AC's in bank buildings around the world...).

Nevertheless: the race in the Miners world is to build the most energy-economic Chips (even at 7 nm). And studies are done to change the POW into POS algorithms (Ethereum is the first to try stepping over, if they prove it gives the same Security as POW than Bitcoin might follow).