Topics

[The Economic Value of the Blockchain]

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?

For this project to be successful, we must:

1. Build a Quality Product
2. Convince People to Use It

As far as 1 goes, my current experiences lead me to believe that more "buzz" must be created. Over the last few months, many people contact me via email to say the same thing: that they just heard about the project and are very excited about it and want to help. Not enough people have heard of Truthcoin.

For 2, we have several strategies available to us. To attract traders, we can create our own heavily-subsided markets, topically popular markets (sports, politics), or arbitrage-heavy markets (finance, stock prices). This will cost some $ but is more than worth it. If successful will it would make $$ (so may even be self-financing). The LMSR helps us a great deal in this area.

Hard to be more specific at this point in time. As we move farther down the road, we can more clearly see the next challenges.

http://gavintech.blogspot.com/2014/06/bit-thereum.html

It must be mining.

Mining must be the origin of this 51% number. After all, the phrase "51% attack" has been in the public discourse frequently and recently. That must be it.

For some reason, many Bitcoin 2.0ers have been assuming that something called "honesty" exists and that 51% of people/oracles are it. Even the Great Skeptic, Gavin Andresen, has yielded to temptation. The sad truth is that "honesty" is a function of 1: "What do I gain from being dishonest?", and 2: "Can I get away with it?". So there will always be some juicy, irresistible carrot which presents itself at some crucial time, and forces people to realize that they are dishonest.

We even have sayings for this "Every man has his price", "Opportunity makes the thief", etc. Of course, we pretend to experience honesty, because it makes us seem more trustworthy ("all of the people I hang out with are honest" "honesty is normal for our group" "that guy rambling about dishonesty is some untrustworthy fringe character"). Even our thoughts about honesty are expressed dishonestly!

Bitcoin assumes that all miners will act in their own self-interest. Separately, it says that to attack the network you would need to, at some cost to yourself, in a moment of pure spite, use a huge percentage of highly-coordinated hashrate to disturb the block-ordering. I assume similarly for Truthcoin.

I think Gavin's idea would be vastly improved if you could easily prove that an oracle signed a "bad" outcome (to then punish him), ie, if there were a cost to signing a bad outcome. Reliance on signer-oracles reminds me of the "nothing at stake" problem in this way. Why not at least try to scam someone?

"to a time when truth exists and what is done cannot be undone"

http://gutenberg.net.au/ebooks01/0100021.txt

Hal Finney is apparently a big name in the Bitcoin world. I first learned of him at Robin Hanson's blog, in 2008.

Here's a post where he endorses conditional (what I call 'multidimensional') prediction markets.
http://www.overcomingbias.com/2008/07/intrades-condit.html

Although InTrade has been defeated, hopefully our work here will have a chance of reviving this important idea.

 I'm just throwing this idea out here. Assuming it even makes sense, it certainly wouldn't be in version 0.1.

The design incorporates Markets that have a 'Beta', which adds liquidity to the Market at some upfront cost.

Its possible that someone (Alice) will see a market, and say "I'm interested in learning about this, I wish that market were more liquid." Currently, Alice can donate $ to the Market to increase its Beta, as easily as making a share purchase.

However, it might be better to reward Alice for doing this (more of "I think that more people would trade if the Beta were just a little higher."). Perhaps she can get a tiny fraction of any future trading volumes, if the original owner agrees? If some other condition is met? Any ideas?

[no other coin-types have done similarly]

This coin will be mined "Proof of Work" (PoW) as designed by Satoshi, for several reasons.

Firstly, PoW is the optimal mining scheme from a technical perspective. As PoW coins have run for several years now, while being (a) Functional (no crashing), (b) Decentralized (without required checkpoints), and Secure (no huge reorgs or trust problems), and no other coin-types have done similarly, the burden of proof is on those who oppose PoW. If you think your mining scheme is so great, you're welcome to prove it (prediction markets, developer consensus, or empirically by running your software for several years).
To clarify, I would change my mind, and agree that X is technically superior to Proof-of-Work mining, if:

• One or more 'knowledgable individuals' (defined as "those who have a track record of exposing previously-undiscussed flaws in alternatives to Proof of Work", including but not limited to: gmaxwell, andytoshi, and DeathAndTaxes), signed off on your idea as potentially viable. If they decide that they are too busy to look into your idea, then they would be too busy to sign off on it, which would be signedoff(idea)=FALSE.
• You ran your coin's software for a few years, with a level of centralized interference comparable to Bitcoin (ie, negligible). Peercoin does not satisfy this requirement, and if you don't know why, ask yourself "Am I really sufficiently qualified to examine, assess, and propose new mining protocols?" .
• Some horrible flaw were demonstrated in PoW, such that almost anything else would be desirable. I would expect a flaw of this nature to destroy, or nearly destroy, the Bitcoin network. Complaining about someone-who-owns-better-miner-hardware-than-you, or mining pools (which have existed for years without causing any problems), are examples of items which would not satisfy this condition.
• Of course, I would also accept a reputable prediction market (as in, I personally believe it is viable enough to attract traders) whose price testifies to the future-confirmation of any of the above conditions.

Secondly, this coin will attempt to use merged-mining (ie double SHA-256, the same as Bitcoin), as it gives the coin a high degree of security for free. If you think you have a better way of doing things, again, you're free to attempt to prove it (see above).

Thirdly, this coin is already attempting to do new things (prediction market transactions), so even if a better mining algorithm were found, it would be unwise to attempt two experimental ideas at the same time. First we would establish PMs under the most conservative avenue possible (the existing avenue: PoW), secondly (much later) we would switch that system from PoW to X. To do otherwise would be to put the PM part of project (aka "the project") in jeopardy for no real reason.

Again, if you feel you have an alternative, first indicate which of the above criteria you've satisfied (ie which number, 1 through 4), then indicate the possible benefits that might result from a completely perfect, bug-free implementation of your scheme and it's interaction with reality, assuming everything goes completely as expected.

This topic has been moved to Incentives / Game Theory.

http://forum.truthcoin.info/index.php?topic=16.0

This topic has been moved to Incentives / Game Theory.

http://forum.truthcoin.info/index.php?topic=17.0

(Not about coding the software).

[two units of account]

One confusing thing about my project, which has confounded even extremely intelligent people, is that there are two units of account moving at once (in addition to the accounting going on within each Prediction Market). It was even difficult to explain:

Old Usage (Bitcoin-Focused Whitepaper):

1. "Coins" are exactly like Bitcoin (and, in the whitepaper, were Bitcoin), you use them to make trades in PM, to create PMs, to pay PM and Miner fees.

2. "Truthcoins" or "voting shares" or "reputation" are the ownership layer, they do the work of Voting on Outcomes, and are redistributed through RBCR. The exponentially-smoothed largest-eigenvector of the vote matrix.

[3+...] When you Buy or Sell in a prediction market, you are buying and selling tokens. These were historically known as shares (ie 43 shares of 'Barack Obama wins', "selling 17 shares at $.45/share"), and there were at least twice as many of these as there were markets (1 'yes/no' pair for this, 1 pair for that, etc.), and they all had to be kept separately from each other, as each was of course a different asset.

New Usage (Altcoin-Focused Truthcoin.info):

Now, with the heaviest of hearts, I'm going to change the wording to one that is probably more consistent with the average cryptocurrency-user's preconceptions. The primary reason for this change, is the abandonment of the use of Bitcoin as the Marketplace's currency, in this new (Altcoin) project.

Here goes: Within this forum, the names are Truthcoin (or just 'Coin', or 'Cash', or 'TRU', note that this is completely the opposite of what was originally the case)CashCoin and VoteCoins (which define the branches, do the work of Voting, and collect payment in Truthcoins). This leaves open the creation of branches ("Votecoin:Sports"). Finally, to avoid screwing this up any more, the States of the Markets which individuals buy and sell will retain their original name of Shares.

Unless there is a riot, I will be editing the whitepaper to use this language (and regrettably, remove the word "Bitcoin"). I'm open to suggestions, but we'll need to coordinate eventually and Dictator's Choice is often the most efficient way of getting that done. I'll try to rip off this band-aid as quickly as possible.

Name	Layer	Usage
TruthcoinsCashCoins	Currency/User	Transfer Value, Make trades, Create PMs, Pay Miner fees for inclusion of TX.
Votecoins	Owner/Employee	Vote on Decisions, Participate in the Consensus Mechanism (and RBCR), Earn Fees as payment.

Edit: I have updated again, changing Truthcoins to CashCoins. I think this is an even better fit, but, more encouragingly, this terminology emerged spontaneously from a conversation I was having with a large group, suggesting to me that it is much more reliable.

I just wanted to offer my appreciation to Ben G., who created the first Truthcoin forum. Unfortunately I got a little confused wrt to my multiple email clients, so that one never really took off. I always wanted to use the SimpleMachines forum, as it is used by Bitcoin/Bitshares/etc, and I did want to fully control the web host and domain, so this new forum was likely inevitable.

But still, thanks for getting it started!

With the introduction of Scaled Decisions, one can bet on, for example, the USD/TRU rate and simultaneously the likelihood of an election outcome. For example, by betting that the USD/TRU rate would fall, and betting that Hillary Clinton will win as 2016 US President, you can ensure that you will be paid if she wins, but also that you will be hedged against a falling price of TRU. Essentially you have available to you a Prediction Market in USD.

One can even bet on DJIA/USD, and USD/TRU at the same time, for similar purposes. See tab "MV Scaled" of my excel sheet (https://github.com/psztorc/Truthcoin/raw/master/docs/LogMSR_Demo.xlsx) for a small example of this idea. Notice cell AE30 where I say "This portfolio will be worth return(d1) regardless of what happens to d2."

I will try to expand on this later, when I have more time.

[Market Scoring Rules (MSRs)]

I'll be constantly improving this when I have more time.

Market Scoring Rules (MSRs): MSRs replace the double-auction system (with bids and asks) with a simple update rule. Its optimal for a lot of things (particularly blockchain trading), but mostly for PMs, where people don't want to reveal (potentially secret) information by placing bids and asks that go unfilled. In a PM we want traders to be able to trade immediately and often. For details on how this works see my Excel demo (feedback appreciated): https://github.com/psztorc/Truthcoin/raw/master/docs/LogMSR_Demo.xlsx

Multidimensional Markets: Normally, with a PM, you be on something you think will happen. Multidimentional markets let you bet on 2 of 2 or 3 of 3 or N of N things, all happening together. Why do this? Firstly, MSRs make it cheap to do so, and preserve the option to bet on only 1 of 2, or 1 of 3 things.  Software can make it psychologically cheap to do this. The costs are low. The benefits, however, are high. With mathemagic, we can move marginal, joint, and conditional probabilities around, and example the real-world relationship between two or more events. Ie, would the economy improve more under Fed policy 1 or 2? Would a stock price be higher with CEO Joe or CEO John?

I wrote some papers which some have found useful:
https://github.com/psztorc/Truthcoin/raw/master/docs/2_PM_Types.pdf
https://github.com/psztorc/Truthcoin/raw/master/docs/3_PM_Applications.pdf

And why not read a blog post by none other than Hal Finney, possible inventor of Bitcoin?:
http://www.overcomingbias.com/2008/07/intrades-condit.html

More blog posts about conditional markets:
http://www.overcomingbias.com/2008/04/if-i-had-a-mill.html
http://hanson.gmu.edu/futarchy.html
http://www.overcomingbias.com/2013/04/diagnosis-futures.html
http://www.themoneyillusion.com/?p=15446

Side chains appear to be taking too long. I, for one, would prefer not to wait.

However, this design change (to abandon side-chains) alters my concept of 'branching', which solved a number of scalability problems. Instead, it seems that all the branches will have to be contained within one software/blockchain.

This raises some technical questions:
Will this cause blockchain bloat? (Probably not, would be a problem with Bitcoin way before this).
Will people spam the creation of branches? (Probably not, if branch-creation has no strategic impact on blockchain size)
How exactly should branches be created? (One basic idea is to use a colored coins concept, and split a small amount to individuals as desired. This is nice because colored coin technology has already been invented. Absolute care must be taken to make sure that fees are never paid with a share [a colored coin] and always with the basic coin layer).

It does hurt to have to change the design, even this slightly, from my initial January publication, but the original branching proposal would now (in the world of non-side-chains) double the coins with the shares, which is obviously unacceptable.

Normally, I think a lot about problems before I post about them, but since I'm starting a forum with a lot of smart people, I'm just going to throw these half-baked ideas out there and see if a discussion comes back.

Prediction Markets (PMs) can be confusing. Even people who work in Finance have often never even heard of them.

In my intro paper (https://github.com/psztorc/Truthcoin/raw/master/docs/1_Purpose.pdf) I linked to a number of videos designed to make the education process relatively painless:

1. John Stossel gives an introduction, The Stossel Show, (4:13).
http://www.youtube.com/watch?v=N_DWqeR9jqc

2. Neil deGrasse Tyson sketches out the general idea, Real Time with Bill Maher, (1:22).
http://www.youtube.com/watch?v=Klgp_qDiRhQ&t=4m8s

3. InTrade and the 2008 Presidential Election, CNBC, (2:22).
http://www.youtube.com/watch?v=VORxDkInNV4

4. CEO of InTrade on Elections and Recessions, Kudlow Report, (4:06).
http://www.youtube.com/watch?v=qJ8t0bF8JOg&t=8s

5. News segment on PMs, The Stossel Show, (8:31).
http://www.youtube.com/watch?v=4Fkv1MAkZEw

Searching within one forum and across forums/websites to find info can be very inefficient.

The best place to look is the website: http://www.truthcoin.info/
Specifically, Papers and Presentations. The FAQ and Weaknesses sections try to stay current, as well.

After finishing the project design, my friends and family had trouble understanding what the point of it was. Although I felt inarticulate and frustrated for a short time, I since collected my thoughts and experiences in the PM world and wrote them all down.

The "manifesto" is here: https://github.com/psztorc/Truthcoin/raw/master/docs/1_Purpose.pdf

Comments are welcome, of course.

[Crypto]

Here I'm going to try to keep a running summary of everyone's PM projects. I know I'll find this useful.

Crypto
https://www.predictious.com/ (Traditional Double-Auction)
https://www.fairlay.com/ (Custom Double-Auction)
https://www.betmoose.com/ (Time-Multiplied Parimutuel)
https://www.realitykeys.com/ (No public market)
https://crypto.cab/ (Undetermined)
http://www.reddit.com/r/ethereum/comments/25hxim/binary_prediction_market_contract/ (Market Scoring Rule)
http://xbet.io/categories/main_page/Soccer/england/England:%20Premier%20League (European-football and horse racing only)

Fiat
http://www.intrade.com/v4/home/
https://hypermind.lumenogic.com/hypermind/app.html?#welcome ( previously http://www.inklingmarkets.com/ and NewsFutures )
http://tippie.uiowa.edu/iem
http://betfair.com/
https://www.ipredict.co.nz/
http://kn-x.com/ (?)
https://www.crowdmed.com
https://www.predictit.org/


Token
https://scicast.org/#!/
http://ideosphere.com/
https://prediction.microsoft.com/#!/home
http://playpivit.com/


Graveyard

http://www.reddit.com/r/BetsOfBitcoin/
http://www.reddit.com/r/Bitcoin/comments/211yss/betsofbitcoin_down_probably_stolen_users_coins/

http://www.sportsbookreview.com/sbr-news/btcsportsbet-bitcoin-sportsbook-steals-6-700-winnings-6082/

https://bitcointalk.org/index.php?topic=581982.0

https://betcoiner.com/
https://bitcointalk.org/index.php?topic=451995.msg7960686#msg7960686