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Topics - psztorc

Outside Work / Article on Financial Statements Insurance
December 16, 2014, 03:14:53 PM
From The Economist:
The most elegant solution comes from Joshua Ronen, a professor at New York University. He suggests "financial statements insurance", in which firms would buy coverage to protect shareholders against losses from accounting errors, and insurers would then hire auditors to assess the odds of a mis-statement. The proposal neatly aligns the incentives of auditors and shareholders—an insurer would probably offer generous bonuses for discovering fraud. Unfortunately, no insurer has offered such coverage voluntarily.
Development / New Truthcoin Implementation: Augur
November 17, 2014, 06:19:05 PM
Check it out:

Tomorrow I'll probably put some screenshots up on

( Again, though, these aren't written by me. So far I'm just doing the theory and my reference functions.
General / Website Up thanks to Alex
October 15, 2014, 10:20:58 PM
The website at is now sort of up!

Its not really finished, until I get the new docs and some block posts up, but it is a start.
Outside Work / Inspirational News from Scott Sumner
October 02, 2014, 03:50:02 PM

" But again, the real goal is to shame the people in power into stopping all this Nostradamus nonsense, and move economics and economic policymaking into the 21st century.  It's long past due. "

Tell it like it is, brother!

Most interestingly of all: " As a reward I'm willing to name the market after the big donor when I write about it in my blog. "

By "Big Donor", he means $1500 to $30,000 !!??  Even as a poor scholar, I'm thinking about doing it myself!! Who's game?
Off Topic / Applied Futarchy
September 30, 2014, 08:30:37 PM
IMHO, the "weak point" of Futarchy is the 'goal metric'.

In corporate governance ("Fire the CEO" as advocated by Hanson), the stock price is the goal metric. This is convenient because the spot price of a corporation's stock is itself resistant to manipulation (the dividend payments, and market for loanable funds, should keep it in lockstep with the market value of the assets of the corporation). A parallel metric for a non-profit might be some metric set by its board of trustees, or by a nation's voters, but this metric would probably not be resistant to manipulation. In the business world, you can't fake what you've produced: it's either there (to take home to your family, or sell) or it's not. Advocates of Futarchy mention GDP, leisure, education, inequality, and health.

GDP (PPP) per capita is a highly reliable indicator of national However, if we adopted GDP/Pop as our 'goal metric', the reliability might plummet. Futarchy would demand that we adopt the policies which increase pc GDP as measured by X, so it is likely easiest for a tyrant to go straight for X, and through that, seize control of the nation's policies and the nation itself.

Most other ideas seem open to Sybil attacks. The best idea I have so far is:
1] Have every Bitcoin (or CashCoin) account sign a message answering: "From 0 to 20, how satisfied are you with your government?"
2] Average the satisfaction numbers, with the BTC balance as weights.

We can have several different metrics (" satisfied are you with respect to 'educational availability', or "your health").

The most obvious problem is that: This is a plutocracy (the government is doing whatever the wealthy want [some consider this a "pro" instead of a "con"]). A second obvious problem is that this is self-report (you can have a terrible educational outcome, but lie or exaggerate your experience), which is why I bite the bullet and ask something directly subjective ("how satisfied are you").

To solve problem 1, we might try something like this:
[1] n = nations_population (quantity of ballots)
[2] Cryptographic set up of 'the vote' (on this day, this many keypairs, this voter-eligibility).
[3] Go to election HQ on election day, randomly select your sheet with a keypair.
[4] Go home to Namecoin, use your keypair to extract the "ballot form", use it to cast your votes.
[5] Check the outcomes after the fact.

I have no idea how to solve the second (self-report) problem.

Does anyone have any ideas in general, about how to reliably measure a nation's success?
General / /r/truthcoin
September 14, 2014, 02:19:35 PM
Does anyone know who owns /r/truthcoin ?

This community is too small, and has too-little daily news to actually support a subreddit, but I thought I would reserve it. However, someone else has reserved it already. In fact, they must have reserved it a long time ago, because I remember checking in April or so.

I did reserve /r/truthc0in, though, in case the owner of /r/truthcoin  can't be reached.
General / Outcome-Resolution Demo
September 06, 2014, 10:35:12 PM
My friend Alex has created a prototype demo, where one can more easily understand the way that outcomes are calculated. On Tuesday, I will be giving a presentation directly on that topic, as well. I hope to have the slides done soon.

Cool Consensus Demo Site:

Note that the demo would, obviously, differ from the actual experience in several ways. For example:

1. In the demo, one can set all the Votes one wishes, ie, changes everyone's Ballot as much as they want. In reality, one would only set their Ballot (ie, only one row), and one would do it before any other Ballots were visible.

2. In the demo, (for simplicity) each person's vote counts equally. In reality, each person's vote would count in proportion to their ownership of VoteCoins.

3. The demo is only of one period. In reality, such a vote would take place each Voting Period (with different questions, of course).

4. In the demo, the questions sometimes refer to events which took place several years ago. In reality, the questions would likely all be on events taking place within the previous Voting Period (ie, the preceding 6 weeks).

5. The demo has short 'question titles', to fit them into cells of a simple matrix. In reality, the questions would be longer and clearer. For example, the original question texts were:

    QID1: In the United States, following the 2012 November elections, was Barack Obama elected US President?
    QID2: In the United States, following the 2012 November elections, was Mitt Romney elected US President?
    QID3: In the United States, following the 2012 November elections, did the Democratic Party control 51 or more Senate seats?
    QID4: In the United States, following the 2012 November elections, did the Republican Party control 218 or more seats in the House of Representatives?
    QID5: In the United States, following the 2012 November elections, how many seats in the House of Representatives were controlled by the Republican Party? Range: 0 to 435
    QID6: During the 2011-2012 United States football season, did the New England Patriots (AFC) win the 2012 Super Bowl (XLVI)?
    QID7: During the 2013-2014 United States football season, did the Denver Broncos (AFC) win the 2014 Super Bowl (XLVIII)?
    QID8: On June 27th, 2014, was the closing price of the Dow Jones Industrial Average (INDEXDJX:.DJI) above 16000?
    QID9: On June 27th, 2014, was the closing price of the SPDR Gold Trust (ETF) (NYSEARCA:GLD) above 120?
    QID10: On July 9th, 2014, what was the closing price of the Dow Jones Industrial Average (INDEXDJX:.DJI, USD per Share, 2 decimal points)? Range: 8000 to 20000

6. The demo has only 10 Decisions (columns), I anticipate realistic VoteMatrices to have 30-100 Decisions (columns).

7. The demo does not have any Decisions which I would consider to be vague or un-answerable (ie, the ".5" selection), although this may happen in reality.

8. In reality, there would be an instruction on what to vote for a S decision which was vauge (either its max or its min). In the demo this instruction isn't present.

The graphic is exactly of the form of the two examples in the 1.3 Whitepaper, Figure 4 (page 31). In summary, the rectangles represent votes (this is simple), but the votes gain/lose transparency base on how coordinated "the Ballot they came from" was with other Ballots (this is more complex).
Basics / How can they be THIS good?
August 25, 2014, 05:15:26 PM
Observe this interesting forum post:

Quote from: AsymmetricInformation on June 04, 2014, 07:14:04 PM
The correct answer is "around August 20th", until someone trades otherwise.

Unless those who say otherwise have some other way of proving that they aren't lying. (I'm all ears).
It appears BitAssets will be launched the 22th of August.

I'm impressed.

At the time, back in early June, this forecast seemed pretty extreme (nearly 3 months?! many were predicting that BitsharesX would be released much earlier). My comment back on June 4 (above) was to interpret Fairlay's markets in a way that would be relevant to the Bitshares community, but it was also -at least as much, if not more- to encourage skeptics to get in and make a trade.

The standing PM-forecast turned out to be staggeringly accurate. BtsX was released with relative functionality in a sort of ongoing process from around August 20th to today, August 25th.

The forecast appeared, in my reading, to be driven essentially by only two or three traders. How is it possible that two people, likely neither of them Dan L, or his teammates, managed to outperform the popular opinions held and expressed by so many other people?

One answer is meta-knowledge, knowledge about your knowledge:
1. The "talk is cheap" effect (people who didn't know were silenced by the PM).
2. Project Management - Specific vs General (some people know about delays, human nature, interpreting of a CEO's claims, even if they don't really know anything about the specific project that the CEO is doing).

In the end, even my 'challenge' to the BTS community likely substantially improved the forecast: I challenged people to prove their confidence in the release date with a bet, but no one rose to the challenge. This favored a forecast later.
Off Topic / New Taleb Book
August 04, 2014, 06:26:48 AM

Its off to a great start, as usual.

QuoteThis author is currently teaching a course with the absurd title "risk management and decision-making in the real world"...this is a total absurdity...In "real" disciplines, titles like "Safety in the Real World", "Biology and Medicine in the Real World" would be lunacies. But in social science all is possible as there is no exit from the gene pool for blunders, nothing to check the system, no skin in the game for researchers.

Hopefully some of those things can change!
Advanced / Market Empiricism
August 04, 2014, 06:26:01 AM
Empirical scientific publications are all about spreading the word on "experimental evidence". You'd say: "If you run electricity through water using terminals, you can produce Hydrogen and Oxygen gas."

After you published this, people would know that, if they tried this themselves, they could expect the same result. Science thus became a Team Sport. For quality-control and scaling purposes, no single person would replicate everything, only a few "peers" (people in the same area) would check the results to make sure that they made sense. Thus Peer Review was born.

It worked well then, and it works pretty well now. The problem I have with it is that it sometimes doesn't scale past the environment it evolved in (one where everyone knew everyone else's name and what they were working on, one where one only published something they felt would replicate). I might be wrong, but there are some big differences. Nowadays, a replication study ("we got the same results as X") is practically unpublishable (worthless), you need cash just to look at the insiders-club from afar (journal articles are rarely open access), and to join (ie publish something) I just believe that, in certain instances, careful flattery of the reviewers would count for more than accuracy. There's a difference between empirical predictions that sound reasonable to a target audience vs those that are actually correct. Lastly, there is a "publication bias" toward "being interesting". For example, in economics, it is difficult to find a study explaining that 'everything is fine' with respect to current policy (about anything). It's just more fun to criticize.

There is another way: a Truthcoin Dominance Assurance Contract.

I'm going to try one out that's slightly different from what I've previously described. Imagine a 2 x 2 PM stating (Will Trusted Replication Firm attempt to replicate Study X?) along the row and (Will the results of Study X be upheld?) on the column. We have four states:

Not ReplicatedReplicated
Not Attempted: 12
Attempted: 34

Individuals creating these Markets would do so to capitalize on any perceived disagreement, just like any other PM-Author.

Individuals buying States 1 and 2, would be those who either felt that the study wouldn't be chosen for replication, or wanted to subsidize the contract for replication (give Trusted Replication Firm some $ reasons to replicate the study).

Individuals buying State 3 would be those who feel the study is 'bad' and would not replicate if a replication was attempted.

Individuals buying State 4 would be those who feel the study is 'good' and that it would replicate if a replication was attempted.

The audit firm would buy States 3 and 4 equally, just before they decided to audit the study. They can uniquely profit because only they know which studies they will choose to replicate. (Ideally, this would be random). They receive a payout of 1 no matter what the outcome is, which they purchased for <1, so they profit as well.

The whole point of doing this, however, is that one would be able to look at all of the market prices for all studies (not just those that one attempted to replicate) and assess the quality of work that way.

These markets might be a little thin. Would universities or governments subsidize them? What about a single study, perhaps a very controversial or interesting result?
I was doing the math on people front-running trades, and concluded that it might be a problem after all. Specifically, a blind strategy of copying nearly-all trades that one sees, doesn't have an edge, but does disrupt expectations of normal users (which is a problem).

Luckily, I think there is a solution in good 'ole proof-of-work, on the transactions themselves. Basic game theory tells us that, to reliably sort people into groups, we need something that is more expensive for members of one group than the other. We then reward people who can "send" that "signal". The solution is simple: assuming that a given hash/second costs the same for everyone (unfortunately, this is a weak (the weakest) part of the algorithm), more hashes in the same amount of time would cost more.

For example, assume everyone can hash 1 per second for free, and buy extra hashes/second for 1$ / hash.
If I start hashing at t=0, and hash 60 seconds, I have 60 hashes at t=60. I spent nothing.
If someone else started hashing at t=20, and hash until t=60, I only have 40 hashes at t=60. To get 60 I need to spend $20.

So the idea is to have individuals build a transaction, and then "store up" a required minimum amount of time in that transaction by hashing it to below a certain value. This at least discourages front-running of trades, as it is now costly.

I'm curious as to how developers would implement this solution. Require nodes to do this (possibly doubling as ddos protection)? It seems overkill to hard-code anything into the block-validation rules.

I doubt specialized ASIC-trader-services would emerge, as they only produce revenues if you can hash quickly AND have actionable trading info. If they do emerge, they'll probably be perfectly competitive "brokerage firms", facilitating trades in a very very cheap way (hashes aren't really differentiable).
General / PM Info: Reliable and Common
July 22, 2014, 04:22:46 PM
Normally, when you learn something, you can't easily share what you learned. You can only share what you say you learned. There's a big difference.

For example, you could personally have gone into a library for 5 years and read everything about acorns. When you're done, though, all you can tell people is that you think you know about acorns.

But wait, can't you just impress them with your acorn vocabulary? And your acorn dialogues, and your plan for efficient acorn-based power-generation? Actually, you can't at all! Your audience hasn't read those acorn books, and so they have no idea what you're talking about. A mediocre actor could simply improvise lines about acorns, into acorn-vocab-rich sentences that have nothing to do with reality. The public knows it, too, and so won't care about what you have to say.

You might call the librarian(s) as witnesses to your scholarship, but I can simply find a second mediocre-actor to be a fake-librarian. You might graduate from Impressive University concentrating in Acorn Studies, but that takes a ton of time and money, and I can (more cheaply) hire my own IU-grad mediocre-actor to argue against you. ( And the students did not synthesize any new/unique Acorn info while they were there, as the same courses/curriculum were available to all students. Plus, IU probably just admitted a bunch of perfectionists/conformists with rich/connected parents, or a feel-good-story/minority background that would make IU look good in its Trustee-Reports. )

The problem gets much, much worse. Lets say that you do convince some people in the audience that the Acorn Power Plant is a great idea, but meanwhile I convince some people that the APP is a terrible idea, and that anyone who supports it should be made fun of and exiled from society. What are your supporters going to think and do? Faced with challenging the status quo for uncertain benefits amid certain punishment, they will think: " I know that I want the APP, but does anyone else want it? ". Unfortunately, it is likely that they will all simultaneously think this, and all simultaneously remain silent. Then you will be left to stand alone (and exiled), or only a bunch of fringe counterculturalist pseudo-hipster extremists (eager to prove how contrarian they are) will stand with you (and those guys always do something embarrassing).

People who learn the answer often leave the conversation, as the effort spent trying to convince others concerning matters such as (my personal examples) the minimum wage vs guaranteed income, "buy american", pro-manufacturing, entitlement-sustainability, farm subsidies, etc (all of which are essentially settled issues among professionals of all persuasion) is simply not worth it. Thus, a debate remains where none really exists.

Prediction Markets, as you may be guessing, do not have these problems! When the price of  ( Electricity Cost | Build APP=TRUE ) falls, reflecting cheaper energy with the Acorn Power Plant, everyone involved knows that the consensus changed to be more-favorable to "the APP is a good idea". But, far more importantly, everyone knows that every single other person knows that the consensus explanation changed. Those disagreeing are now automatically on the defensive.

I should say that PMs haven't yet completely dodged this problem. Usually, people will directly attack the premise that PMs are accurate (and therefore not a source of knowledge, let alone common knowledge). But even this problem is self-solving. Over time, the accuracy of PMs manifests itself empirically, even if some people are unable or unwilling to understand exactly why they are always so accurate.
Off Topic / Fed Policy Disagreement
July 17, 2014, 01:54:21 PM
A cool (short, readable) Fed Policy document:

Claims that the Fed should focus only on preventing the money supply from falling. Cites increasing moral hazard and some cool facts I didn't know about relative frequency of banking crashes at different points of time and in different countries.
Advanced / Prediction Wish List
July 15, 2014, 03:32:50 PM
I'm just going to list some predictions it would be nice for society to have, in no particular order. Please contribute!

(TRU/USD exchange rate on t1), t2, t3,...

A healthy quantity of these markets would allow individuals to make and sustain a reliable investment denominated in USD, and pegged to the dollar's value. They would also allow individuals to "bet in" US Dollars, currently a more reliable store of value (ie, less likely to experience severe decreases in purchasing power).

Conditional CEO
(Stock price on GE) x (GE's CEO fired)   
(Stock price on GE) x (GE's merger/de-merger)

The stock market provides an optimal metric (share price) for targeting. With conditional markets we may be able to send economic growth soaring.

Conditional on Questionable Laws
(GDP 5 years from now) x (Repeal laws against insider trading)
(GDP 10 years from now) x (Balanced Budget)
(Life Expectancy) x (Single-payer health insurance)
(Unemployment Rate) x (Minimum wage increase)
(Inflation) x (Fed Policy)

Conditional on Candidates
(GDP) x (Candidate Y elected)
(War Casualties) x (Candidate Y elected)
(Budget Deficit) x (Candidate Y elected)

As a society, it is very difficult to vet the best laws/candidates. What's the point, of spending one's own efforts if others cannot be convinced of your research? Essentially, the real challenge is not knowing what's best (although that is hard) but establishing the common knowledge required for us to coordinate our votes effectively (ie, the paradox no one likes Congress, yet no one will "throw a vote away" on a third party).

Ethics / The Long Arc
(Will country X still practice Slavery?) X (Will Slavery be considered to be, by widespread consensus, immoral?)   [ Example ]
(....Family Court without a Jury?)    [50 years from now]
(...income tax?)
(...separate branches of government with different levels of funding?)
(...balanced federal budgets?)
(...term limits for elected officials?)

Sometimes its easy to know Right from Wrong, but other times it is more difficult. In general, however, the task gets easier with time (to quote MLK: "The arc of the moral universe is long, but it bends towards justice").

(Study Z chosen at random for audit) x (the Reputable Audit Firm to replicate the results of Study Z)

These would require that a "reputable auditing firm" be established.

Private Decision Support
(Will I die?) x (Disease Treatment)
(Will I lose my job?) x (Choice of degree/major/training/industry/firm)

Some of this is already being done:
Development / C++ Dev Wanted
July 11, 2014, 01:58:37 PM
toast (of Bitshares) is working on this project in his spare time, and would like "an experienced C++ programmer" help him bang out a Truthcoin version over the next few days.

Message me or reply to this forum post if you can collaborate, or want more details.
General / Presentation Draft
June 29, 2014, 10:42:43 PM
My interview on LTB did generate some Investor-Interest. It got me thinking, and so today I drafted a presentation on Truthcoin's private valuation.

It's hardly my best work, from any viewpoint (presentation skills, econ skills, etc), but I thought I'd throw it out there to let everyone (investors, coders, testers, commentators) know what they might be a part of.

I'm mostly not sure what we'd do with any money we got, without a CTO to hire/manage programmers (and how exactly do we find him/her? ...ideally an investor would just choose). Money for liquid initial markets will probably be a must, but it would cost a fraction of what would be spent on paychecks (I had imagined I would do it myself).

Again, maybe a 3 hour effort!
Off Topic / MOVED: Tru-therium
June 14, 2014, 06:45:22 PM
Off Topic / MOVED: Bribery via truthcoin
June 14, 2014, 06:45:01 PM
Advanced / Tru-therium
June 11, 2014, 01:22:37 PM
Into (reader can skip this)

Everyone has been picking on Etherium lately. To me, this suggests a growing fear that Eth may *gasp* be extremely useful, and *double-gasp* might, possibly uniquely have the ability to challenge and destroy Bitcoin's hard-won network effects.

Just for kicks, I'm going to propose my own Ethereplacement : Trutherium! No, its not a joke, but its pretty close because I have essentially no cryptography experience and barely-acceptable coding skills (especially compared to this crowd). Honestly, though, I've mostly been waiting patiently to say "Trutherium" for a few days now...they both contain "th"! My joke idea should be easy to criticize if you're knowledgeable, so please don't hold back.

Gavin's Bit-Therium, is pretty cool (the same Bitcoin we know and love, with Etherium). However, he assumes a majority of trustable oracles, which I don't like. Oracles should have to buy-in/sell-out to discourage Sybil/retirement attacks, should suffer if they try to attack the network (successfully or otherwise), shouldn't know what other oracles plan to do, should have an incentive to hide what they plan to do..

Oh, I'm describing part of my own project there.

Sketch of the Idea
With Truthcoin, we have reports combined into a consensus via eigenvector. The economics of it were finely-tuned to prediction markets, but can substitute PM-States for contract-states, LMSR for arithmetic-accounting, and the user-generated 'Votes' for contract resolution reports made by oracles. Complex payouts could be built into the Market section, with several Decisions being assembled Wall-St-style into 'derivative' contracts (to build polynomial payoffs for example). The fee structure could be set to auto-.5 if not enough fees had been paid, or to predominantly rely on the listing fees (not trading fees).

Wednesdays are busy for me...might write more about this later. Again, I don't take this very seriously, having watched mission-creep steal the life out of many a good project. I just thought I would join the club, because I don't believe in trusting oracles.