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Yes of course, I do not doubt this.


Can you answer the questions?:

If a fixed supply of shares is best, why are startups willing to dilute shares when they get investors?

for gold, doubling mining investment rate doubles the rate of gold production. Bitcoin is unique in that doubling the rate of investment doesn't change the rate of production at all. Can you give any reasoning for why it is bad to change the rate of production relative to investment for new coins, but good to change the rate of production to keep it at a fixed ratio to the current price of a coin?

Sorry if I typed something that seemed contrary to a rudimentary financial concept. I have 2 questions:

If a fixed supply of shares is best, why are startups willing to dilute shares when they get investors?

for gold, doubling mining investment rate doubles the rate of gold production. Bitcoin is unique in that doubling the rate of investment doesn't change the rate of production at all. Can you give any reasoning for why it is bad to change the rate of production relative to investment for new coins, but good to change the rate of production to keep it at a fixed ratio to the current price of a coin?

http://paulgraham.com/equity.html
Paul Graham seems to think that diluting the shares can be worth it when the investor increases your valuation enough.

Looking at an example from the startup world. Lets say you own 10% of a small company, and someone shows up to make a huge investment, buying 50% of the company at a price that makes the company worth 10x more.
Now you don't own 10%, you only own 5%, but the company is worth 10 times more, so your investment is worth 5x more, even though you have a smaller percentage of the total. Your shares got diluted, but you still earned profit.

Now compare against a blockchain example:
Imagine a blockchain with a market cap of $4 billion.
You own 10%.
An investor wants to invest in the blockchain similarly to how they invest in startups. They want to buy in very rapidly. Over the course of a week, he spends $1 billion mining the cryptocurrency.

This should dilute your shares, and increase the market cap, just like the startup example.

The new market cap $4+$1 =  $5 billion
20% is how much they paid, so they should own 20% of the coins.
You only own 8% now, not 10%, but it is worth the same amount as before.

Do you really not know how prices are determined? Obviously the two correct answers are "supply" and "demand".

Sure, price is from supply and demand, I don't see how that relates.
I was making a claim about the market cap, not the price.
I claim that the only way to raise the market cap is by doing POW, which can possibly take the form of advertising.

I want to make a blockchain with a $ trillion market cap.

There are 2 ways to increase the market cap of a cryptocurrency:
1) burning value by advertising.
2) burning value by mining.

No one wants to do (1), because the reward goes to every coin holder. The person who pays for the ads gets an insignificant portion of the reward.

(2) works great, but in bitcoin it is a small continuous rate. It will take too long.

My goal is to have a blockchain that sells at the correct price, like bitcoin does, and also changes the number of coins sold depending on how many coins people want to buy at that price, so that the market cap can grow very fast.

Reread the whitepaper. SVD can reliably handle matrices of 500 Million rows by 150,000 columns.

I doubt that we can compute the SVD of a 75 terabyte matrix in a reasonable time.
In bitcoin hivemind, starting a full node means re-computing the SVD of every oracle judgement ever, right?

Maybe SVD is efficient, great. But Martin's example sure isn't, and it is important too. We want to be able to completely remove the need for arbitrage between markets. The USD:GOLD, GOLD:BTC, and BTC:USD markets make a triangle, if someone buys in one, it should change the prices in all three. It is better to make one big market to hold these many types of shares.
There is no limit to the number of prices that are related. The more we can fit into a single market, the less we bleed to arbiters. 

Casey Detrio's ideas about batch based trading look like they could get computationally expensive too.

Oracles are different, because they can steal money today, they will *need* to be (over)paid in the future.

I agree that oracles need to be over-paid. They can be over-paid by hubs too. They don't need to collect trading fees to be over-paid.

Moreover, as far as updates are concerned, "smart contracts" is entirely equivalent to a "hard fork", so there is no difference. Any C++ compiler is Turing-Complete.

Will you be removing bitcoin script from bitcoinhivemind then?

I think that turing completeness in ethereum was a mistake. I prefer how bitcoin script works, it is not turing-complete.

When I use bitcoin script to write up custom multi-sig contracts, do you think it is equivalent to a hard-fork?
How come the bitcoin community is debating the 2 megabyte block update so much? Shouldn't it be "entirely equivalent" to writing up a bitcoin script contract?

FlyingFox script is not turing-complete. It is very similar to bitcoin script, with a few more opcodes added to make it easier to write stuff like oracles and markets.

No one would prefer the assets that have crazy expensive fees attached.
They don't want to pay a huge fee to sign up. They don't want to pay a huge fee to use it.

A too slow rate of coin creation results in massive fees for new rich users who want to purchase an amount of the coin on the order of the market cap.
A too fast rate of coin creation results in massive fees for ongoing usage of the coin, by inflation.

A linear rate of creation will usually be either too slow, or too fast. It can't adapt.

The value of the coins is approximately equal to the value of the resources destroyed in creating those coins.

If a rich person spends 2x the market cap of bitcoin buying bitcoins, no resource is destoyed. The USD don't get destroyed, they go to other bitcoin holders who sell. So the market cap can't increase.
So the rich person ends up with less than 50% as much value as they started with.

How are you suggesting we burn value to get the market cap to grow? By advertising?
That is just as expensive as POW, but unlike POW the profit isn't going to the advertiser/miner, it is going to everyone holding coins.

I was confused before, let me clarify: We should use the technology being introduced in this thread, even if we don't use channels or smart contracts at all.
SVD is too slow when the matrix is big. If x is the size of the matrix, it takes something like O(x^2) cycles to compute the SVD. If we used this new technology we only need to use O(2*log(x)) cycles, a massive improvement.

3. Moving the oracle resolution off chain is a bad idea, something akin to individuals who only pay taxes if they needed to call the police for help last year -- the result would be an underfunded police department, rampant theft, and everyone smart would move away (or avoid accumulating capital)...it would be impossible to ever raise tax money, in any way, and the town would have collapsed into violence and/or be avoided by everyone.

Your argument against off-chain resolution reminds me of the argument against torrents:
No one will pay musicians if music is free, so we wont get new music any more.
But torrents didn't kill music. The music industry adapted to making money in different ways.
It doesn't matter what is best for musicians or music. Customers prefer to pay less. The cheapest technology wins.

When channel state changes, it usually has to go through one or more hubs. The hub collects trading fees.
The hub wants there to be lots of traders so he can collect lots of trading fees. There will only be lots of traders if there is a reliable oracle.
The hub will spend money regularly for the oracle to settle questions that are being gambled on, even though the results wont get put onto a blockchain. He publishes settlements from the oracle to prove that the oracle works as it should.

Once there are multiple hubs, they will probably share an oracle for some bets.
To fund settlement for an oracle that is shared between hubs, they could use a truthcoin dominant assurance contract.

Since they provide no other benefits, ...[generalized smart contracts] will almost certainly not exist.

What about the ability to update the SVD, or the market maker, or the order book, or the match maker?
What if we want to change from continuous trading to batch trading?
There is no way we will get this all right the first time. Smart contracts let us update later.

Welcome to the forum

Last I tried running the truthcoin code, it seemed to function well, but there wasn't a network for it to connect to, so I couldn't test many pieces.
There are 3 other teams that I know of that are building truthcoin implementations besides BitcoinHivemind. My project is called Flying Fox, which is in Erlang. I am mostly working alone. There are 2 truthcoin projects on Ethereum: GroupGnosis and Augur.

http://forum.groupgnosis.com/t/we-need-smart-markets/113/3

a state channel is like the channels that make up the bitcoin network, but they contain arbitrary state. The 2 participants of the channel can make bets with each other without wasting space on-chain.

Before this new discovery, if there was a dispute the entire contract is published on-chain, and computed over.

With this new design, only a single word of the code gets revealed, and a single moment of state.
If the code is X words long, closing the channel involves log(X) transactions.

This new design for channel state will allow us to do more intense computations. Opening up the possibility for anti-arbitrage smart markets like koeppelmann suggests. It will be affordable to compute intense SVDs off-chain.

Maybe it is time for bitcoin hivemind to move the oracle resolution off-chain.

Most would say that the asset should serve it's current owners, not prospective new owners.

If that were true, then every time a new address is added to the system, we should require a 100 bitcoin fee, which is shared among everyone who already had coins.

Adding arbitrary fees to new users and giving the money to old users is often bad.

Linear rate of coin creation doesn't punish new users exactly, it only punishes new rich users.

The value of the coins is approximately equal to the value of the resources destroyed in creating those coins.

If a rich person spends 2x the market cap of bitcoin buying bitcoins, no resource is destoyed. The USD don't get destroyed, they go to other bitcoin holders who sell. So the market cap can't increase.
So the rich person ends up with less than 50% as much value as they started with.

I don't understand turnpin's proposal at all.
Are you talking about allocating the initial coins?
Are you proposing to give the coins to miners? bitcoin holders? It sounds like you want to give them to gamblers.

It is possible for me to bet against myself, and neutralize my risk. It makes it look like I am gambling a lot.
The money is inaccessible for the time it is locked up to gamble. So this is identical to paying someone for making a security deposit. It runs into the same inefficiencies as a bond-based POS distribution http://www.truthcoin.info/blog/pow-cheapest/#the-coinbase-rot-paradox-less-is-more
search for "Tendermint"

I posted the same idea the other day.

http://forum.bitcoinhivemind.com/index.php/topic,259.msg1251.html#msg1251
February 02, 2016, 01:01:28 am

I think that technically this is a valid oracle, but it seems difficult to program.
I don't like the idea of people voting the wrong way for moral reasons. I am worried that a politically charged event could result in a blockchain fork. If people on opposite sides of the fork have contradictory morals.

For example, imagine a group of people who owned $100 billion wanted to convert all that money to bitcoin. They should own 94% of all the bitcoin after this transaction, because all existing bitcoin is only worth 6% of the amount they are buying.

Going to each individual bitcoin owner and asking them to sell 94% of their coins is very difficult.

If someone tried this with $100 billion by trading, I bet they would own less than 1/2 of the bitcoin at the end, because the price would keep going up.

The mechanism I describe for flying fox would allow them to own the full 94% they paid for.