Truthcoin: The Second of Two Blockchains?

[psztorc]

Will a blockchain be useful for something other than Bitcoin / Truthcoin? What makes these two ideas special where other ideas are not?

The Economic Value of the Blockchain
A service provided by blockchain has two key differences from other service-providers: the service is codeable (digital information only, no physical products or services) and it is reliable (performs the same way regardless of the country, time of day, the user's age, race, religion, criminality, or morality).

With these differences in mind: for which services will the ROI for a software investment be maximized with a blockchain?

The market has spoken for Bitcoin; let us interpret its words: wealth transfers were easy to code (basic arithmetic), and the marginal reliability was extreme ( {taxes, inflation, bank hours, e-gold} were unreliable in the sense that you were treated worse if you were {high-income, unbanked/unpopular, day-job-employed, e-gold customer} ).

Why has Bitcoin, specifically, done so well? Many companies on the internet will sell services which are codeable and reliable (Google, Facebook, Amazon). These services are reliable because it is easy to be reliable. They do not store your value, they accept your value. Bitcoin is a distributed asset ledger, it keeps track of who owns what. Reliably storing value is very difficult, you are tempted to cheat, and you can be hacked/sued/closed down.

So, more precisely, blockchains win with services which are codeable and which store value.

What Can't Bitcoin Do?
For raw value-storage, one can use Bitcoin. With the introduction of colored coins / metacoins, Bitcoin can store custom digital assets. User-controlled multisig, nLockTime, and sequence numbers can greatly enhance the user's security and transfer experience.

At first glance, multi-party multisig would appear to open the door to every conceivable type of contract imaginable. Get together with your trading partner, and specify that a transaction will go through if some rules are followed. Using multisig, if you and your partner don't agree on the post hoc interpretation of the rules, both of you can turn to a trusted third party -- Wait! We went too far there: upon closer examination, multisig does not represent a powerful extension of Bitcoin, if anything it represents a contradiction to Bitcoin!

Bitcoin was supposed to eliminate the need to trust someone else with your money, yet this trust is precisely what multisig re-needs. Some may cheer at the shift from existing entrenched firms to hyper-competitive digital firms, but I don't (see "Comments"). Bitcoin is weak on purposefully storing value - instead it simply describes where value is currently stored. Those businesses which store customer's Bitcoin (namely exchanges and betting sites) routinely lose or steal those funds.

This weakness would imply the viability of a blockchain which could store up Bitcoin and conditionally pay it out (as would be required in betting markets, gambling/lottery, insurance, and at exchanges).

Truthcoin Trustless Escrow
Truthcoin enables individuals to participate in a prediction marketplace containing a trustless outcome-resolution service (ie, an escrow running entirely on greed and not on second-order abstractions such as 'honesty'). The prediction market concept is flexible enough to contain functions for gambling, insurance, and portfolio replication (currency exchange), as well as other functions.

Does a Decentralized Economy Need a Third Blockchain?
With Bitcoin and an internet connection, anyone can start a business selling anything. This takes an already-decentralized economy, and turns the decentralization up to 11. Some services require customers to escrow their Bitcoin, which may require the creative use of multisig, reputation, insurance, fidelity bonds, etc. Finally, there are business arrangements which are impossible without a trustless escrow. These services can use Truthcoin.

Assuming the existence of MaidSafe, ClearSkies, or similar, what is the economic case for any other "DAC"? Or for Etherium? Some feel that these designs are cheaper, but this is hard to see. Software development/maintenance requires a great deal of highly-skilled work, and then the software "rots" as it gradually becomes obsolete. Bitcoin is supported by users in forums, in lieu of salesmen/customer-service-reps. The work is done by volunteers, but it still requires effort. Open source software projects can thrive on community-autopilot, but they are also regularly abandoned (and many Bitcoin-projects have already achieved vaporware status). Bitcoin's unique status as money not only incentivizes development/maintenance but also co-opts money's-status-as-a-network-effect to onboard and coordinate programmers.

Unless you've come across another good to sell, which is codeable, value-storing, and timeless, blockchains aren't worth your effort! Just start a normal business instead! You can flexibly adjust your prices and service offerings as you, the manager and entrepreneur, see fit! Some things aren't codeable, and a lot of the time you'll want to be "unreliable". You'll want to treat some customers differently from others. Software bugs, miner attacks...these can crash blockchains permanently! Put those skills toward writing a great piece of software (which you sell for Bitcoin).

It is quite early in the game, but the empirical evidence is piling up on my side. Many firms have sprung up to use/accept Bitcoin, yet still (to date) no other useable "DAC" or "Ethereum" has been born, let alone seen its first birthday (Bitcoin is 5 and a half). How long will it be until that changes? 6 months? 5 years? Forever?

[psztorc]

A discussion of this essay has started here: https://bitsharestalk.org/index.php?topic=4942.0

[BldSwtTrs]

That was an interesting read.

The way I see things is that the blockchain technology enable to remove work and human related risks in plenty of tasks, which will inevitably lead to an huge increase in efficiency.

It's akin to the mechanization that has removed the need of work for producing a lot of things. Yes you need human capital to construct the machine, to maintain it and to replace it, but the net effect is a huge increase of efficiency because at the end of the day you need less workers to produce the same result (or a better result).

So you are saying that this increase in efficiency may only be applicable to a very specific set of tasks but I don't see a convincing explanation of why it will be so.
Work will be removed wherever it can be, human related risks will be remove wherever it can be, not just in the "reliable and codeable" subset of tasks that you outline.

[psztorc]

Thanks for reading!

So you are saying that this increase in efficiency may only be applicable to a very specific set of tasks but I don't see a convincing explanation of why it will be so.

A few people have expressed a similar thought. I hope to clarify this point in a revision of this draft: a FIRM can consist almost entirely of software! Google / Facebook are run in almost the same way as Bitcoin, a group of programmers meeting to collaborate on software.

I should emphasize more: people are confusing [technology / software / innovation] with [DACs / Etherium]. To say that the blockchain is an inefficient model is not to say that technology is inefficient.

[BldSwtTrs]

OK I see now that my argument "it's remove work" is not valid since other way of software improvement also remove work.

What blockchain still do is removing human related risks. My Facebook and Google data are vulnerable to the greed/ideology/incompetence/whatever of the top management of those companies whereas my data inside a blockchain is not.

So I guess the superiority of blockchain exist in domain that requires reliability, as you said. Now I agree with you on that, but I am not sure the needs of the services that requires reliability will be meet with only two blockchains. For example the law enforcement service may well fit within that category.

[toast]

Now I agree with you on that, but I am not sure the needs of the services that requires reliability will be meet with only two blockchains.

Yep, this is really the main selling point. If you could convince me ethereum would be as cheap and as decentralized (look at GHash.io for BTC....) as 1000 individual blockchains then I'd agree with you.

[psztorc]

What blockchain still do is removing human related risks. My Facebook and Google data are vulnerable to the greed/ideology/incompetence/whatever of the top management of those companies whereas my data inside a blockchain is not.

Recall that there are firms providing zero-knowledge backup services (SpiderOak), and that blockchains can be (and have been) designed in ways vulnerable to greed/ideology/incompetence/whatever.

Yep, this is really the main selling point. If you could convince me ethereum would be as cheap and as decentralized (look at GHash.io for BTC....) as 1000 individual blockchains then I'd agree with you.

1000 firms may be even more efficient than 1000 blockchains. Still, I think this essay-attempt sketches out an argument against Etherium (that it wouldn't need to be used for anything). I do feel that Etherium is being hyped by coders because it glorifies code, but we'll see.

[toast]

The discussion has forked and IDK which thread you check, here's my response/question on btstalk:

I'm arguing FOR one blockchain to rule them all. If someone argued against it, I would expect them to (at a bare minimum) describe one hypothetical situation where a blockchain would be required that did NOT involve the storage of money (Bitcoin) or escrow of money (Truthcoin).

Hmmm...

* We need a blockchain that can handle 1000x TC's transaction volume (bandwidth) at some given time for the purpose of currency exchange
* We need a blockchain that can handle 1000x TC's storage at a given time for the purpose of domain name record storage

So these two only work if resources available >> resources needed, but for any given resource bound there is a range where the specialized one can succeed and TC can't.

The more important one:

* We need a blockchain where the value of the equity reflects the service performed by the nodes running the network to attract more such "useful" nodes, which means mapping core asset creation/destruction to particular operations.

Are you claiming that all possible incentive structures that need control over their token can be somehow simulated with PMs?

[zack]

blockchains that I expect to exist in the future:
1) store of value (bitcoin)
2) prediction markets
3) bounty market/assassination market
4) anonymous mixing. use bitcoin which is tainted with your identity to buy anoncoin, participate in a mixer, then use your now anonymous anoncoin to purchase bitcoin.
5) forum/social network/blogging (bitmessage and twister are early examples)
6) p2p games of perfect knowledge, particularly games which are resistant to artificial intelligence: go, chess, 6-in-a-row, amirra, goofspiel, civilization
7) slot machine games: blackjack, satoshidice, etc.
lotteries
9) votecoin. one address per citizen. This type of coin is evil. My hope is that all the good developers will refuse to make it.

I expect every blockchain to have coins with an exchange rate against bitcoin.
I do not expect anyone to use side-chains.
I do not expect any of this to be built on top of bitcoin.

I spend my time trying to make a very simple blockchain which can be used as a starting point to build any of the blockchains listed above. https://github.com/zack-bitcoin

[toast]

blockchains that I expect to exist in the future:
1) store of value (bitcoin)
2) prediction markets
3) bounty market/assassination market
4) anonymous mixing. use bitcoin which is tainted with your identity to buy anoncoin, participate in a mixer, then use your now anonymous anoncoin to purchase bitcoin.
5) forum/social network/blogging (bitmessage and twister are early examples)
6) p2p games of perfect knowledge, particularly games which are resistant to artificial intelligence: go, chess, 6-in-a-row, amirra, goofspiel, civilization
7) slot machine games: blackjack, satoshidice, etc.
lotteries
9) votecoin. one address per citizen. This type of coin is evil. My hope is that all the good developers will refuse to make it.

I expect every blockchain to have coins with an exchange rate against bitcoin.
I do not expect anyone to use side-chains.
I do not expect any of this to be built on top of bitcoin.

I spend my time trying to make a very simple blockchain which can be used as a starting point to build any of the blockchains listed above. https://github.com/zack-bitcoin

just a suggestion: http://legacy.python.org/dev/peps/pep-0008/

[psztorc]

blockchains that I expect to exist in the future:
1) store of value (bitcoin)
2) prediction markets
3) bounty market/assassination market
4) anonymous mixing. use bitcoin which is tainted with your identity to buy anoncoin, participate in a mixer, then use your now anonymous anoncoin to purchase bitcoin.
5) forum/social network/blogging (bitmessage and twister are early examples)
6) p2p games of perfect knowledge, particularly games which are resistant to artificial intelligence: go, chess, 6-in-a-row, amirra, goofspiel, civilization
7) slot machine games: blackjack, satoshidice, etc.
lotteries
9) votecoin. one address per citizen. This type of coin is evil. My hope is that all the good developers will refuse to make it.

Not a bad list, although 6-9 I'm not sure about, and 4 might be redundant to CoinJoin contract. (People may even be able to use PMs to mix, or gamble). 3 I'm not sure anyone really wants, its "fun" to act threatening and impressive, but will any cool-headed developers debug that software? How will a long-term community form?

I think you may be correct about BitMessage (although its still unpopular), although I mention MaidSafe/clearskies to bring up the data-angle.

[zack]

Inventions like the stirrup, trigger mechanisms for crossbows, gunpowder, nuclear bombs, all changed the world.
Do you also think the Manhattan project was done for "fun"? That USA spends 1/2 of federal taxes on war for "fun" of being scary?

When the dominant weapon was something that every individual can own and afford, then hierarchies stops mattering, and free markets take their place. When the dominant weapon can only be owned by a government, society swings the other way. Centralized institutions get control of everything.

A famous essay about this: http://www.outpost-of-freedom.com/jimbellap.htm

War is currently at about $2 trillion annual. Assassination markets will be more efficient, so I expect the cost of war to go down a couple orders of magnitude to maybe $10-100 billion per year spent into assassin markets.
Depending upon how many assassin markets are competing for customers, between 0.1 and 10% of this money will go to a group of between 2 and 10 developers.

I expect prediction markets to be 10-100 times bigger than assassin markets.

[delulo]

9) votecoin. one address per citizen. This type of coin is evil. My hope is that all the good developers will refuse to make it.

What are you arguments here?

[zack]

Citizen coins give a horrifying amount of power to the government.

Since you cannot get a new address, it is possible to attach a criminal record to your address.
It is possible for government to turn off a person's ability to spend money, or confiscate it all.
With bitcoin-like systems, you can only count votes based off of how invested a person is. Similar to a privately owned business, if you own 1/13th of a business, it makes sense that you should have 1/13th of the say in what happens. This type of voting is essential for private property and liberty.

With citizencoin it is possible to count one-vote-per-person. There is no object that is owned between everyone this way, and there never will be. This type of voting is not done to make decisions on our own property, rather this type of voting is done to decide how we should use someone else's property.

For example, with one-vote-per-person they might vote on how much taxes to gather from each social class.

Bitcoin is to anarchy what citizencoin is to statism.

[psztorc]

Since you cannot get a new address,

What happens for all of the people who forget their passwords / password stolen and published to the internet?

I think they'll be lots of new addresses.