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Date: Fri, 23 Jun 2017 10:51:20 -0400
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>Miners who are able to deal with the bandwidth caused by drivechain coffee
transactions will profit from these transactions, whereas smaller and more
geographically distributed miners will not.   Those miners will, in turn,
build faster ASICs and buy more electricity and drive out smaller players.

I think you are conflating 3 different (though overlapping) groups:

1. Block header generators. These need 'good internet' meaning very low
latency, reasonable bandwidth, good place in network (e.g. FIBRE or mining
backbone). They need reliable computers with enough RAM and CPU to validate
prior blocks promptly and immediately assemble new blocks.

2. Hashers. These need cheap electricity, access to economical uses of
waste heat, cheap mining hardware. e.g. IOT electric water heater.

3. ASIC manufacturers. These need lots of capital, etc.

It might be helpful to keep these three groups distinct in your mind and
conversation, and to use the protocol as a crowbar to pry them into
separate people, or at a minimum make it economically possible to
participate in one role without needing to participate in the other two. If
different, geographically and politically dispersed groups are helping
perform these functions, it aids decentralization.

On Fri, Jun 23, 2017 at 10:19 AM, Erik Aronesty via bitcoin-dev <
bitcoin-dev@lists.linuxfoundation.org> wrote:

> > They would certainly not be cheap, because they are relatively more
> expensive due to the extra depreciation cost.
>
> This depends on how long you expect to keep money on a side chain and how
> many transactions you plan on doing.   Inflation is a great way of paying
> PoS / PoB  miners - that cannot introduce issues with consolidation.   If
> you design the inflation schedule correctly, it should be balance
> transaction costs *precisely*.   Indeed, you can calculate the exact amount
> of inflation needed to guarantee that a side chain is always exactly 10
> times cheaper than bitcoin.
>
> >As I posted to bitcoin-discuss last week, I support UTXO commitments for
> sidechains.
>
> Indeed, I think side chain nodes should always be fast-synced from 6 month
> old commitments and thus be ephemeral, cheap, and *never *appropriate for
> long term storage.  This would provide the best possible incentive
> structure to keep the main chain secure, paid for with high clearing fees,
> etc.
>
> > I don't think that blind merged mining messes with the main chain's
> incentive structure
>
> The critical issue is that we cannot introduce protocol changes that
> *further *incentivize geographical and institutional consolidation.
> Miners who are able to deal with the bandwidth caused by drivechain coffee
> transactions will profit from these transactions, whereas smaller and more
> geographically distributed miners will not.   Those miners will, in turn,
> build faster ASICs and buy more electricity and drive out smaller players.
>   I think this is *abundantly *clear, and is the primary motivation
> behind preserving block size limits.
>
> If this premise is false (which it may be), or is skewed so as to damage
> bitcoin as a whole (could be as well), then that needs to be demonstrated
> *first*.
>
> The lightning model does the opposite of this.   Miners watch fees
> increase and coming from an *orthoganal* protocol that cannot cause further
> centralization.
>
> One problem is that the main chain also *must* grow in response to
> bandwidth, or the disadvantages of using the main chain will weaken
> financial support and hashrate securing it.   I believe this is also true,
> and that a "balancing act" will be Bitcoin's norm until we adopt something
> like BIP103 - which provides a steady and appropriate growth.
>
>
>
>
>
> On Thu, Jun 22, 2017 at 4:30 PM, Paul Sztorc <truthcoin@gmail.com> wrote:
>
>> Responses inline.
>>
>> On 6/22/2017 9:45 AM, Erik Aronesty wrote:
>>
>> Users would tolerate depreciation because the intention is to have a
>> cheap way of transacting using a two-way pegged chain that isn't controlled
>> by miners.  Who cares about some minor depreciation when the purpose of the
>> chain is to do cheap secure transactions forever?
>>
>>
>> Thus far you've claimed that these transactions would be "cheap", "[not]
>> controlled by miners", and "secure".
>>
>> They would certainly not be cheap, because they are relatively more
>> expensive due to the extra depreciation cost.
>>
>> I also doubt that they would be free of control by miners. 51% hashrate
>> can always filter out any message they want from anywhere.
>>
>> For the same reason, I don't understand why they would be any more or
>> less secure.
>>
>> So I think your way is just a more expensive way of accomplishing
>> basically the same result.
>>
>>
>> Add in UTXO commitments and you've got a system that is cheap and
>> secure-enough for transfer. storage and accumulation of a ledger... before
>> moving in to the main chain.
>>
>>
>> As I posted to bitcoin-discuss last week, I support UTXO commitments for
>> sidechains.
>>
>> Seems better to me than messing with the main chain's incentive structure
>> via merged mining.
>>
>>
>> I don't think that blind merged mining messes with the main chain's
>> incentive structure. Miners are free to ignore the sidechain (and yet still
>> get paid the same as other miners), as are all mainchain users.
>>
>> Paul
>>
>>
>> On Thu, Jun 22, 2017 at 9:27 AM, Paul Sztorc <truthcoin@gmail.com> wrote:
>>
>>> Hi Erik,
>>>
>>> I don't think that your design is competitive. Why would users tolerate
>>> a depreciation of X% per year, when there are alternatives which do not
>>> require such depreciation? It seems to me that none would.
>>>
>>> Paul
>>>
>>> On 6/20/2017 9:38 AM, Erik Aronesty wrote:
>>>
>>> - a proof-of-burn sidechain is the ultimate two-way peg.   you have to
>>> burn bitcoin *or* side-chain tokens to mine the side chain.   the size of
>>> the burn is the degree of security.    i actually wrote code to do
>>> randomized blind burns where you have a poisson distribution
>>> (non-deterministic selected burn).    there is no way to game it... it's
>>> very similar to algorand - but it uses burns instead of staking
>>>
>>> - you can then have a secure sidechain that issues a mining reward in
>>> sidechain tokens, which can be aggrregated and redeemed for bitcoins.   the
>>> result of this is that any bitcoins held in the sidechain depreciate in
>>> value at a rate of X% per year.   this deflation rate pays for increased
>>> security
>>>
>>> - logically this functions like an alt coin, with high inflation and
>>> cheap transactions.   but the altcoin is pegged to bitcoin's price because
>>> of the pool of unredeemed bitcoins held within the side chain.
>>>
>>>
>>>
>>> On Tue, Jun 20, 2017 at 7:54 AM, Paul Sztorc <truthcoin@gmail.com>
>>> wrote:
>>>
>>>> Hi Erik,
>>>>
>>>> As you know:
>>>>
>>>> 1. If a sidechain is merged mined it basically grows out of the
>>>> existing Bitcoin mining network. If it has a different PoW algorithm it is
>>>> a new mining network.
>>>> 2. The security (ie, hashrate) of any mining network would be
>>>> determined by the total economic value of the block. In Bitcoin this is
>>>> (subsidy+tx_fees)*price, but since a sidechain cannot issue new tokens it
>>>> would only be (tx_fees)*price.
>>>>
>>>> Unfortunately the two have a nasty correlation which can lead to a
>>>> disastrous self-fulfilling prophecy: users will avoid a network that is too
>>>> insecure; and if users avoid using a network, they will stop paying txn
>>>> fees and so the quantity (tx_fees)*price falls toward zero, erasing the
>>>> network's security. So it is quite problematic and I recommend just biting
>>>> the bullet and going with merged mining instead.
>>>>
>>>> And, the point may be moot. Bitcoin miners may decide that, given their
>>>> expertise in seeking out cheap sources of power/cooling, they might as well
>>>> mine both/all chains. So your suggestion may not achieve your desired
>>>> result (and would, meanwhile, consume more of the economy's resources --
>>>> some of these would not contribute even to a higher hashrate).
>>>>
>>>> Paul
>>>>
>>>>
>>>>
>>>>
>>>> On 6/19/2017 1:11 PM, Erik Aronesty wrote:
>>>>
>>>> It would be nice to be able to enforce that a drivechain *not* have the
>>>> same POW as bitcoin.
>>>>
>>>> I suspect this is the only way to be sure that a drivechain doesn't
>>>> destabilize the main chain and push more power to miners that already have
>>>> too much power.
>>>>
>>>>
>>>>
>>>>
>>>
>>>
>>
>>
>
> _______________________________________________
> bitcoin-dev mailing list
> bitcoin-dev@lists.linuxfoundation.org
> https://lists.linuxfoundation.org/mailman/listinfo/bitcoin-dev
>
>

--001a113b1506051d790552a1bc32
Content-Type: text/html; charset="UTF-8"
Content-Transfer-Encoding: quoted-printable

<div dir=3D"ltr"><span style=3D"font-size:12.8px">&gt;Miners who are able t=
o deal with the bandwidth caused by drivechain coffee transactions will pro=
fit from these transactions, whereas smaller and more geographically distri=
buted miners will not.</span><span style=3D"font-size:12.8px">=C2=A0=C2=A0 =
Those miners will, in turn, build faster ASICs and buy more electricity and=
 drive out smaller players.</span><br><div><span style=3D"font-size:12.8px"=
><br></span></div><div><span style=3D"font-size:12.8px">I think you are con=
flating 3 different (though overlapping) groups:</span></div><div><span sty=
le=3D"font-size:12.8px"><br></span></div><div><span style=3D"font-size:12.8=
px">1. Block header generators. These need &#39;good internet&#39; meaning =
very low latency, reasonable bandwidth, good place in network (e.g. FIBRE o=
r mining backbone). They need reliable computers with enough RAM and CPU to=
 validate prior blocks promptly and immediately assemble new blocks.</span>=
</div><div><span style=3D"font-size:12.8px"><br></span></div><div><span sty=
le=3D"font-size:12.8px">2. Hashers. These need cheap electricity, access to=
 economical uses of waste heat, cheap mining hardware. e.g. IOT electric wa=
ter heater.</span></div><div><span style=3D"font-size:12.8px"><br></span></=
div><div><span style=3D"font-size:12.8px">3. ASIC manufacturers. These need=
 lots of capital, etc.</span></div><div><span style=3D"font-size:12.8px"><b=
r></span></div><div><span style=3D"font-size:12.8px">It might be helpful to=
 keep these three groups distinct in your mind and conversation, and to use=
 the protocol as a crowbar to pry them into separate people, or at a minimu=
m make it economically possible to participate in one role without needing =
to participate in the other two. If different, geographically and political=
ly dispersed groups are helping perform these functions, it aids decentrali=
zation.</span></div></div><div class=3D"gmail_extra"><br><div class=3D"gmai=
l_quote">On Fri, Jun 23, 2017 at 10:19 AM, Erik Aronesty via bitcoin-dev <s=
pan dir=3D"ltr">&lt;<a href=3D"mailto:bitcoin-dev@lists.linuxfoundation.org=
" target=3D"_blank">bitcoin-dev@lists.linuxfoundation.org</a>&gt;</span> wr=
ote:<br><blockquote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;border=
-left:1px #ccc solid;padding-left:1ex"><div dir=3D"ltr"><div><span class=3D=
""><span style=3D"font-size:12.8px">&gt; They would certainly not be cheap,=
 because they are relatively more expensive due to the extra depreciation c=
ost.<br></span><br></span>This depends on how long you expect to keep money=
 on a side chain and how many transactions you plan on doing. =C2=A0 Inflat=
ion is a great way of paying PoS / PoB =C2=A0miners - that cannot introduce=
 issues with consolidation. =C2=A0 If you design the inflation schedule cor=
rectly, it should be balance transaction costs *precisely*. =C2=A0 Indeed, =
you can calculate the exact amount of inflation needed to guarantee that a =
side chain is always exactly 10 times cheaper than bitcoin.<span class=3D""=
><br><br>&gt;<span style=3D"font-size:12.8px">As I posted to bitcoin-discus=
s last week, I support UTXO commitments for sidechains.<br></span></span><s=
pan class=3D"m_5060807304745657670gmail-im" style=3D"font-size:12.8px"><br>=
Indeed, I think side chain nodes should always be fast-synced from 6 month =
old commitments and thus be ephemeral, cheap, and <i>never </i>appropriate =
for long term storage.=C2=A0 This would provide the best possible incentive=
 structure to keep the main chain secure, paid for with high clearing fees,=
 etc. =C2=A0=C2=A0<br><br></span><span class=3D"">&gt;=C2=A0<span style=3D"=
font-size:12.8px">I don&#39;t think that blind merged mining messes with th=
e main chain&#39;s incentive structure=C2=A0<br></span><br></span>The criti=
cal issue is that we cannot introduce protocol changes that=C2=A0<i>further=
=C2=A0</i>incentivize=C2=A0<wbr>geographical and institutional consolidatio=
n.=C2=A0 Miners who are able to deal with the bandwidth caused by drivechai=
n coffee transactions will profit from these transactions, whereas smaller =
and more geographically distributed miners will not. =C2=A0 Those miners wi=
ll, in turn, build faster ASICs and buy more electricity and drive out smal=
ler players. =C2=A0 I think this is <i>abundantly </i>clear, and is the pri=
mary motivation behind preserving block size limits. =C2=A0=C2=A0</div><div=
><br>If this premise is false (which it may be), or is skewed so as to dama=
ge bitcoin as a whole (could be as well), then that needs to be demonstrate=
d <i>first</i>.=C2=A0</div><div><br></div><div>The lightning model does the=
 opposite of this. =C2=A0 Miners watch fees increase and coming from an *or=
thoganal* protocol that cannot cause further centralization. =C2=A0=C2=A0<b=
r><br>One problem is that the main chain also *must* grow in response to ba=
ndwidth, or the disadvantages of using the main chain will weaken financial=
 support and hashrate securing it. =C2=A0 I believe this is also true, and =
that a &quot;balancing act&quot; will be Bitcoin&#39;s norm until we adopt =
something like BIP103 - which provides a steady and appropriate growth.<br>=
<br><br><br><br></div></div><div class=3D"HOEnZb"><div class=3D"h5"><div cl=
ass=3D"gmail_extra"><br><div class=3D"gmail_quote">On Thu, Jun 22, 2017 at =
4:30 PM, Paul Sztorc <span dir=3D"ltr">&lt;<a href=3D"mailto:truthcoin@gmai=
l.com" target=3D"_blank">truthcoin@gmail.com</a>&gt;</span> wrote:<br><bloc=
kquote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;border-left:1px #cc=
c solid;padding-left:1ex">
 =20
   =20
 =20
  <div text=3D"#000000" bgcolor=3D"#FFFFFF">
    <div class=3D"m_5060807304745657670m_-1820278609258644758moz-cite-prefi=
x">Responses inline.<span><br>
      <br>
      On 6/22/2017 9:45 AM, Erik Aronesty wrote:<br>
    </span></div><span>
    <blockquote type=3D"cite">
      <div dir=3D"ltr">
        <div>Users would tolerate depreciation because the intention is
          to have a cheap way of transacting using a two-way pegged
          chain that isn&#39;t controlled by miners.=C2=A0 Who cares about =
some
          minor depreciation when the purpose of the chain is to do
          cheap secure transactions forever?<br>
        </div>
      </div>
    </blockquote>
    <br></span>
    Thus far you&#39;ve claimed that these transactions would be &quot;chea=
p&quot;,
    &quot;[not] controlled by miners&quot;, and &quot;secure&quot;.<br>
    <br>
    They would certainly not be cheap, because they are relatively more
    expensive due to the extra depreciation cost.<br>
    <br>
    I also doubt that they would be free of control by miners. 51%
    hashrate can always filter out any message they want from anywhere.<br>
    <br>
    For the same reason, I don&#39;t understand why they would be any more
    or less secure.<br>
    <br>
    So I think your way is just a more expensive way of accomplishing
    basically the same result.<span><br>
    <br>
    <blockquote type=3D"cite">
      <div dir=3D"ltr">
        <div><br>
          Add in UTXO commitments and you&#39;ve got a system that is cheap
          and secure-enough for transfer. storage and accumulation of a
          ledger... before moving in to the main chain. </div>
      </div>
    </blockquote>
    <br></span>
    As I posted to bitcoin-discuss last week, I support UTXO commitments
    for sidechains.<span><br>
    <br>
    <blockquote type=3D"cite">
      <div dir=3D"ltr">
        <div>Seems better to me than messing with the main chain&#39;s
          incentive structure via merged mining.<br>
        </div>
      </div>
    </blockquote>
    <br></span>
    I don&#39;t think that blind merged mining messes with the main chain&#=
39;s
    incentive structure. Miners are free to ignore the sidechain (and
    yet still get paid the same as other miners), as are all mainchain
    users.<span class=3D"m_5060807304745657670HOEnZb"><font color=3D"#88888=
8"><br>
    <br>
    Paul</font></span><span><br>
    <blockquote type=3D"cite"><br>
      <div class=3D"gmail_extra">
        <div class=3D"gmail_quote">On Thu, Jun 22, 2017 at 9:27 AM, Paul
          Sztorc <span dir=3D"ltr">&lt;<a href=3D"mailto:truthcoin@gmail.co=
m" target=3D"_blank">truthcoin@gmail.com</a>&gt;</span>
          wrote:<br>
          <blockquote class=3D"gmail_quote" style=3D"margin:0 0 0 .8ex;bord=
er-left:1px #ccc solid;padding-left:1ex">
            <div text=3D"#000000" bgcolor=3D"#FFFFFF">
              <div class=3D"m_5060807304745657670m_-1820278609258644758m_37=
22835584705217683moz-cite-prefix">Hi Erik,<br>
                <br>
                I don&#39;t think that your design is competitive. Why woul=
d
                users tolerate a depreciation of X% per year, when there
                are alternatives which do not require such depreciation?
                It seems to me that none would.<span class=3D"m_50608073047=
45657670m_-1820278609258644758HOEnZb"><font color=3D"#888888"><br>
                    <br>
                    Paul</font></span><span><br>
                  <br>
                  On 6/20/2017 9:38 AM, Erik Aronesty wrote:<br>
                </span></div>
              <span>
                <blockquote type=3D"cite">
                  <div dir=3D"ltr">
                    <div>- a proof-of-burn sidechain is the ultimate
                      two-way peg. =C2=A0 you have to burn bitcoin *or*
                      side-chain tokens to mine the side chain. =C2=A0 the
                      size of the burn is the degree of security. =C2=A0 =
=C2=A0i
                      actually wrote code to do randomized blind burns
                      where you have a poisson distribution
                      (non-deterministic selected burn). =C2=A0 =C2=A0there=
 is no
                      way to game it... it&#39;s very similar to algorand -
                      but it uses burns instead of staking<br>
                    </div>
                    <div><br>
                    </div>
                    <div>- you can then have a secure sidechain that
                      issues a mining reward in sidechain tokens, which
                      can be aggrregated and redeemed for bitcoins. =C2=A0
                      the result of this is that any bitcoins held in
                      the sidechain depreciate in value at a rate of X%
                      per year. =C2=A0 this deflation rate pays for increas=
ed
                      security</div>
                    <div><br>
                    </div>
                    <div>- logically this functions like an alt coin,
                      with high inflation and cheap transactions. =C2=A0 bu=
t
                      the altcoin is pegged to bitcoin&#39;s price because
                      of the pool of unredeemed bitcoins held within the
                      side chain.</div>
                    <div><br>
                      <br>
                    </div>
                  </div>
                  <div class=3D"gmail_extra"><br>
                    <div class=3D"gmail_quote">On Tue, Jun 20, 2017 at
                      7:54 AM, Paul Sztorc <span dir=3D"ltr">&lt;<a href=3D=
"mailto:truthcoin@gmail.com" target=3D"_blank">truthcoin@gmail.com</a>&gt;<=
/span>
                      wrote:<br>
                      <blockquote class=3D"gmail_quote" style=3D"margin:0 0=
 0 .8ex;border-left:1px #ccc solid;padding-left:1ex">
                        <div text=3D"#000000" bgcolor=3D"#FFFFFF">
                          <div class=3D"m_5060807304745657670m_-18202786092=
58644758m_3722835584705217683m_-7917178296017049299moz-cite-prefix">Hi
                            Erik,<br>
                            <br>
                            As you know:<br>
                            <br>
                            1. If a sidechain is merged mined it
                            basically grows out of the existing Bitcoin
                            mining network. If it has a different PoW
                            algorithm it is a new mining network.<br>
                            2. The security (ie, hashrate) of any mining
                            network would be determined by the total
                            economic value of the block. In Bitcoin this
                            is (subsidy+tx_fees)*price, but since a
                            sidechain cannot issue new tokens it would
                            only be (tx_fees)*price.<br>
                            <br>
                            Unfortunately the two have a nasty
                            correlation which can lead to a disastrous
                            self-fulfilling prophecy: users will avoid a
                            network that is too insecure; and if users
                            avoid using a network, they will stop paying
                            txn fees and so the quantity (tx_fees)*price
                            falls toward zero, erasing the network&#39;s
                            security. So it is quite problematic and I
                            recommend just biting the bullet and going
                            with merged mining instead.<br>
                            <br>
                            And, the point may be moot. Bitcoin miners
                            may decide that, given their expertise in
                            seeking out cheap sources of power/cooling,
                            they might as well mine both/all chains. So
                            your suggestion may not achieve your desired
                            result (and would, meanwhile, consume more
                            of the economy&#39;s resources -- some of these
                            would not contribute even to a higher
                            hashrate).<span class=3D"m_5060807304745657670m=
_-1820278609258644758m_3722835584705217683HOEnZb"><font color=3D"#888888"><=
br>
                                <br>
                                Paul</font></span>
                            <div>
                              <div class=3D"m_5060807304745657670m_-1820278=
609258644758m_3722835584705217683h5"><br>
                                <br>
                                <br>
                                <br>
                                On 6/19/2017 1:11 PM, Erik Aronesty
                                wrote:<br>
                              </div>
                            </div>
                          </div>
                          <div>
                            <div class=3D"m_5060807304745657670m_-182027860=
9258644758m_3722835584705217683h5">
                              <blockquote type=3D"cite">
                                <div dir=3D"ltr">
                                  <div>It would be nice to be able to
                                    enforce that a drivechain *not* have
                                    the same POW as bitcoin. <br>
                                    <br>
                                  </div>
                                  <div>I suspect this is the only way to
                                    be sure that a drivechain doesn&#39;t
                                    destabilize the main chain and push
                                    more power to miners that already
                                    have too much power.<br>
                                  </div>
                                  <br>
                                </div>
                                <div class=3D"gmail_extra"><br>
                                </div>
                              </blockquote>
                              <p><br>
                              </p>
                            </div>
                          </div>
                        </div>
                      </blockquote>
                    </div>
                    <br>
                  </div>
                </blockquote>
                <p><br>
                </p>
              </span></div>
          </blockquote>
        </div>
        <br>
      </div>
    </blockquote>
    <p><br>
    </p>
  </span></div>

</blockquote></div><br></div>
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<br></blockquote></div><br></div>

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