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I hope, in the future, I am better at ignoring these requests, to instead foster an actual understanding of the idea and code.

Thanks for taking time to explain the thing one more time. You're right that I missed that part about the excel Will go and read it now.

"Price-pegging" by portfolio replication is totally different, would be better called price-tracking. Tokens are issued which would track the price of BTC (or USD, or any other asset) through a decentralized hedging contract, described by vbuterin in SchellingCoin.

Okay, so what I'm trying to understand here - and I've been asking this question a couple times already with no reply - what happens if the volume of tokens exceeds significantly the volume of Truthcoin?

E.g. the whole market cap of TruthCoin is 500 BTC, but people want to keep over 2000 BTC in the system using the tokens. Or even 250 BTC? Won't the system get out of balance / won't the spreads get too high?

I imagine that I want to make a bet for 2000 BTC within TruthCoin. That will need for me to first buy 2000 BTC worth of TC - which would significantly affect the market price for TC, and then create CFDs - again affecting the price, and then (if I win the bet), I'd have to sell TC for BTC again - again affecting the market price, and again eating a big spread.
While one player is unlikely to cause that, I imagine this may cause problems when big events happen. E.g. market for Bitcoin becomes unstable, and everyone wants to bet that it won't fall in regards to dollar.

You could phrase my question in another way also - what will happen if daily trading volume of TruthCoin/Bitcoin is 5 BTC, and I want to make 10 BTC worth of contracts?

So, your current methods of pegging to bitcoin are either replacing the whole Bitcoin with TruthCoin/VoteCoin, or sidechains? I'm not trolling, I'm not making fun. I'm honestly asking.

That was a replacement for Ethereum, not side chains!

We're getting offtopic here, but Gavin also went after side chains. Sorry for nitpicking and derailing the thread Here's a quote from his Bit-thereum article:

But... but... doesn't it have to be more complicated than that? New Bitcoin Script opcodes? Contract code in the blockchain? A merged-mined chain or new colored coin or something?

I don't think so. Bitcoin already provides a global currency and distributed ledger-- there is no need to re-invent those wheels. Combining real-world information with Bitcoin is where things start to get really interesting.

(merged-mined chain, and new script opcodes = technologies required to establish a sidechain)

To answer both questions, by definition this would cost you 51% of the total Bitcoins (to guarantee this).

By "total", you mean half of the bitcoins already in existence? If so, I definitely have a problem understanding how the pegging is supposed to work.

We are theorizing Truthcoin as a side-chain or as an airdropped Bitcoin replacement (what someone on reddit called an 'alt-ledger'). So, either way, Truthcoin would have the same market cap as Bitcoin, or the largest Ethercurrency (or however they decide to organize their digital scarcity).

As for side-chains - you know that one of the core developers recently proposed that the idea be dumped in favour of distributed oracles, right? http://gavintech.blogspot.com/2014/06/bit-thereum.html. As for alt-ledgers / airdropped Bitcoin replacements - any place I can find more info? I probably know the technique, but under a different name...

People do 'mental accounting' all the time

Attackers don't do that. They do real accounting. ("I can burn this ten dollars if it helps me to earn a hundred somewhere else.") But I'm nitpicking here.

I agree with you that it is not an acceptable defense

To be frank, I don't think that 51% percent attack will actually cause problems, because in practice - at least in the main branch - 51% will be owned by people who will not be willing to sell it for any price. Just like in Bitcoin i trust early adopters to not dump 100kBTC during one day.

But the real issue is that pegging mechanism really. That's where I started the discussion on Reddit. With bitcoin sidechains in the freezer, I see no roadmap for betting in BTC using Truthcoin. Perhaps that's because I don't know what that alt-ledger is, or replicating portfolio really - but I don't understand how this can interact with Bitcoin if my business' bets were to be a large part of TruthCoin traffic. I'm probably venturing off the thread's topic here, sorry about that.

You don't "put" [TruthCoins] on a branch. Branches are just created at a point in time, and exist.

Perhaps this is a point I don't understand something. I assume the branch runs on TruthCoins, but there is a way of pegging them to Bitcoin via the replicating portfolio method you mentioned. Or I can just buy enough TruthCoins on the main branch, and then sell them once I used them to destroy another branch.

BTW I may be misunderstanding the whole concept of replicating portfolio you mentioned.
Let's say that it's very early and the market depth for TruthCoins is 5BTC (so, I can buy TruthCoins for 5BTC without significantly changing the price and losing a ton of money on spread, when I want to sell TC back for BTC after the bet finalizes). Is there a way for me to make a bet for 10BTC? I get a feeling that the replicating portfolio mechanism would break, and I'd lose too much money on various spreads, but perhaps I'm wrong?

The reason I'm asking, and really the reason I launched the whole Orisi was that I wanted to create a bitcoin wallet that guarantees that would be denominated in dollars. I wanted to secure it through the term contracts, but after analysing TruthCoin I was afraid that someone would destroy the business by 51% attack, or - if a soft peg was used - once my wallet happened to dominate a branch of TruthCoin, the peg would break away.

However, the people voting in this process are necessarily third-parties

It's different money voting, but it may be the same people. Doesn't the point 6 fall apart here?
0) Let's assume the weak branch has a market cap of 1kBTC
1) I make bets for an equivalent of 1kBTC on a weak branch
2) I buy 25% of VoteCoins on a weak branch, paying 250BTC and use them to lock that branch
3) Once the branch is locked, I create an assurance contract to buy 51% of TruthCoins on the main branch. This costs me who cares how many Bitcoins.
4) If the contract ends successfully, I swing the vote on the weak branch. I sell the TruthCoins.
5) I lose all my VoteCoins' value as people abandon the branch, but I gain 1kBTC from winning the bets.

Also, how will the system react if it's the main branch that is being attacked?

By the way. I know that an attack using 100kBTC, or even 10kBTC is very unlikely, and if TruthCoin gets to that size, it should be stable enough. But what I'm arguing really is that those attacks may keep happening with smaller market caps (10-100BTC).

Even if someone bought up 75% of a branch, people could stop trading on it, and clone the 25% unpurchased part

My instinct is that cloning a branch would cause problems with TruthCoin valuation, or with soft pegging / replicating portfolio. If I have X bitcoins' equivalent on a branch, and it gets cloned (forked?). Do I maintain X bitcoins' equivalent on both branches? I must either misunderstand the way cloning works, or the pegging mechanism you mentioned works.

If your defence is that in case of trouble community will strip away the attacker of TruthCoins or VoteCoins by performing a clone/branch fork, doesn't that mean that I'm really trusting the community, and not the system?

Thanks for helping to improve the idea! I think I am learning more from this discussion than from anyone else (XCP, BTS, MSC, etc).

Thanks for providing all the answers And sorry if some of the questions seem ignorant - I'm an entrepreneur, not an economist or a stock trader, but I try hard to understand all the terminology and concepts.

What if attacker does the following:

- puts a ton of TruthCoins on the main branch by betting all the possible outcomes of an event X - therefore losing only the fees
- then triggers a MetaVote by freezing any one of the branches?

In other words - doesn't MetaVote mechanism provide even a simpler way of attacking? The only cost would be the fees for betting all the possible outcomes of an event X, and 20% of VoteCoins. And of course a cost of freezing the capital within TruthCoins for a long enough time.