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Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

nytimes.com

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Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#91

Post by geofft »

bufferoverflow wrote: post #69
geofft wrote: post #19

What is a "blockchain"? To me, a blockchain is a way of solving double-spend problems in a Merkle tree maintained by open distributed consensus, by using some scheme to resist Sybil attacks. The scheme is not necessarily proof-of-work, but the fact that there's a double-spend problem and you're solving it is key to the idea. If you don't have a double-spend problem because all your transactions commute (e.g., Certifi…

> which meant that it would have been straightforward for China to (globally!) freeze a Bitcoin address No. It's not like all the Chinese miners are controlled by the government. It's not some monolithic agency. And then, there are many other coins.

All Chinese miners are subject to the government's laws. They don't have to be directly day-to-day controlled by the government for the government to say, "We are applying sanctions to this entity, nobody may participate in helping them move money. Mining a block that involves a transaction from this Bitcoin address counts as helping them move money. Mining on top of any new blocks that involves transactions from this Bitcoin address, and therefore causing consensus to accept that block as part of the longest chain, also counts as helping them move money."

This isn't a China-specific argument: I'd expect that any functioning government could the same. The only difference is that governments without a working national firewall would probably be less willing to spend resources on chasing down miners who connect to Bitcoin peers via VPNs in other countries. It just happens to be true in this case that the Chinese government has a national firewall that they use to shut down VPNs, the Chinese government's international interests are often opposed to the US Fed's, and 70% of Bitcoin mining happened in China's jurisdiction last year.

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#92

Post by geofft »

dnomad wrote: post #32
geofft wrote: post #19

What is a "blockchain"? To me, a blockchain is a way of solving double-spend problems in a Merkle tree maintained by open distributed consensus, by using some scheme to resist Sybil attacks. The scheme is not necessarily proof-of-work, but the fact that there's a double-spend problem and you're solving it is key to the idea. If you don't have a double-spend problem because all your transactions commute (e.g., Certifi…

I would say this is a rather limited, technical understanding of a blockchain. The three most interesting aspects of a blockchain are (1) the state of blockchain is visible to all participants (2) the rules (the code) for changing the state is visible to all participants and (3) there is some mechanism to detect and punish rule breakers and aggressors who try to deform the state. Look at it this way and indeed a bloc…

(1), (2), and (3) are true of Certificate Transparency.

(1), (2), and (3) are true of a system where a single trusted coordinator gets to order (and perhaps reject) transactions. A slightly less anonymous version of any electronic stock exchange would count.

(1), (2), and (3) are true of the Debian apt repository.

(1), (2), and (3) are true of any game without secret information, like chess or Go or Pretty Pretty Princess.

You could call all of these "blockchains," but I think that makes the term so generic as to be useless. If you want a national public ledger, that sounds interesting, but please call it a national public ledger, not a blockchain.

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#93

Post by geofft »

thisisit wrote: post #47
geofft wrote: post #19

What is a "blockchain"? To me, a blockchain is a way of solving double-spend problems in a Merkle tree maintained by open distributed consensus, by using some scheme to resist Sybil attacks. The scheme is not necessarily proof-of-work, but the fact that there's a double-spend problem and you're solving it is key to the idea. If you don't have a double-spend problem because all your transactions commute (e.g., Certifi…

> What is a "blockchain"? I am always curious, blockchain was not defined in Nakamoto's work. So, where did the word actually originate from? And what did it meant for the word's inventor.

Wikipedia cites what looks like a mirror of Nakamoto's original Bitcoin source, which uses "block chain" in the comments of main.h: https://github.com/trottier/original-bitcoin/blob/master/src...

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#94

Post by geofft »

marknadal wrote: post #27
geofft wrote: post #19

What is a "blockchain"? To me, a blockchain is a way of solving double-spend problems in a Merkle tree maintained by open distributed consensus, by using some scheme to resist Sybil attacks. The scheme is not necessarily proof-of-work, but the fact that there's a double-spend problem and you're solving it is key to the idea. If you don't have a double-spend problem because all your transactions commute (e.g., Certifi…

There is already a word for what you are talking about, and you used it: Consensus. So I counter your argument. It is useless to call "Blockchain" something that must necessarily have consensus. Or else we should just call it a consensus mechanism, not a blockchain. So instead, I propose the following: A blockchain, is a cryptographically signed linked list. Note, things like "a distributed ledger" aren't included in…

"Consensus" was a word used in the distributed systems literature for all sorts of problems well before the Bitcoin paper. (As was "Sybil-attack-resistant", which is another phrase I ~used that was also in common use.) Bitcoin is interesting because it allows reasonably trustworthy consensus in a Sybil-attack-resistant way for a particular problem, namely, a distributed ledger that permits anyone to participate without permission from a central authority. There were lots of other systems for distributed consensus for other problems: a random example is BitTorrent.

I would actually dispute the definition of "cryptographically signed linked list" for Bitcoin. What makes Bitcoin blocks valid is not that they're cryptographically signed (signatures are over transactions, from the address that is trying to send money, but you can sign two different transactions and now you have double-spend). What makes them valid is the inclusion of a solution to the mining problem that incorporates the data being sent, and I think that in any context other than Bitcoin, "a message that includes a random nonce such that the hash has certain properties" wouldn't be called a "signature" at all. Take Hashcash, the proof-of-work system for email anti-spam that somewhat inspired Bitcoin: the web page and paper calls the authentication token a "stamp", and doesn't use the word "signature". The FAQ suggests an extension for mailing lists using the phrase, "A hashcash specific approach (avoiding signatures)".

I am super excited about CRDTs but they seem like an entirely unrelated problem space to Bitcoin, so using the term "blockchain" doesn't make sense to me. (In the same way that I am excited about DVCSes like git using Merkle trees to allow mergeable offline work without a central coordinator, but git is definitely not a blockchain.) That said, I did say this on an IRC channel the other day:

     I would define "blockchain" as "a Merkle tree that solves the double-spend problem in a way that's resistant to Sybil attacks"
     if your transactions commute, you don't have a double-spend problem, and therefore "blockchain" isn't meaningful
     geofft: doesn't stop people hawking blockchain solutions though :P
     oh, sure
     I would also define "blockchain" as "the word you should use instead of Merkle tree on your investor pitch"
So if that's your reason for using the word "blockchain," good for you :-)

I am reading through your Distributed Matters slides - exciting stuff and the point about ATMs not being strongly consistent is a very good one. Will need to reread a few times to make sure I get it!

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#95

Post by geofft »

cslarson wrote: post #66
geofft wrote: post #19

What is a "blockchain"? To me, a blockchain is a way of solving double-spend problems in a Merkle tree maintained by open distributed consensus, by using some scheme to resist Sybil attacks. The scheme is not necessarily proof-of-work, but the fact that there's a double-spend problem and you're solving it is key to the idea. If you don't have a double-spend problem because all your transactions commute (e.g., Certifi…

This really misses the picture of what's going on. Fedcoin could be coordinated by the federal but live on or be connected to a public smart contract platform where that, now digitised asset, could be used programmatically and interdependently with many other systems in a much more efficient and easy to assemble way than can now be done. This may not sound like a good idea to most on hn but it's at least new.

Smart contracts are cool, but I don't think smart contracts and blockchain are the same technology. (Indeed, Bitcoin does not meaningfully support smart contracts, so we should use different words because they're different concepts.)

It's certainly possible to implement centralized, non-proof-of-work smart contracts: publicly send the Fed's API a Lua script. Whenever the Fed changes their ledger, they run your Lua script in a sandbox with limited CPU, see if it outputs any transactions, and processes them. Anyone can run the Lua script themselves and see if the Fed was trustworthy - but if the Fed chooses not to run your script, well, that's just a centralized bank doing its centralized thing, tough luck.

If you want to not put your reliance on a centralized bank to run your script, then you've got to use a distributed consensus platform. Even if you had something Ethereum-like that the Fed simply oversaw, they could just refuse blocks they don't like (and in fact they'd essentially have to to have any meaningful control of the currency at all), so all the complexity of gas and proof-of-work isn't buying you anything.

Relatedly, and along the lines of what 'patio11 was saying: you can implement smart contracts for a centralized currency today. A startup that had its own API for opening accounts, sending it USD, and running publicly-visible Lua scripts would be a straightforward thing to build, and if that startup ran for enough time, you'd gain (centralized) trust in it doing its thing.

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#96

Post by _red »

lukeschlather wrote: post #85
zerostar07 wrote: post #80

Earlier quoted context omitted.

They don't want to be seen as "not having to answer to anyone" , so they would be going the blockchain rule, i.e. semi-accountability , i.e. stealing some of bitcoin's "decentralized" fame.

The whole point of having a national currency is that the money administrators answer to Congress, not the businesses who borrow and lend money. "Decentralization" means taking power away from Congress and giving it to Goldman Sachs and the other big banks.

The Fed is a private entity which is owned by its "Member Banks" (ie. big banks).

https://en.wikipedia.org/wiki/Federal_Reserve_System#Member_...

Moreover, the currency that the Fed issues is not technically a "national currency", its "Federal Reserve Notes", that is a debt instrument which is theoretically backed by "US Dollars". Where are these US Dollars?..and more importantly how do we get some?

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#97

Post by geofft »

_red wrote: post #96
lukeschlather wrote: post #85

Earlier quoted context omitted.

The whole point of having a national currency is that the money administrators answer to Congress, not the businesses who borrow and lend money. "Decentralization" means taking power away from Congress and giving it to Goldman Sachs and the other big banks.

The Fed is a private entity which is owned by its "Member Banks" (ie. big banks). https://en.wikipedia.org/wiki/Federal_Reserve_System#Member_... Moreover, the currency that the Fed issues is not technically a "national currency", its "Federal Reserve Notes", that is a debt instrument which is theoretically backed by "US Dollars". Where are these US Dollars?..and more importantly how do we get some?

It is not "owned" except in a weird metaphorical sense, and moreover, big banks are obligated to own an exact amount of shares - no more and no less, and they may not sell them - by act of Congress. If you scroll a little bit up from your link: "the 'ownership" of the Reserve Banks by the commercial banks is symbolic; they do not exercise the proprietary control associated with the concept of ownership nor share, beyond the statutory dividend, in Reserve Bank 'profits.'"

A "US Dollar" is a unit of measurement; a "Federal Reserve Note" is a physical object. You can no more own a US dollar than you can own an acre or a joule, but you can certainly own land or a battery. Casting doubt on the US dollar because you can't touch it makes as much sense as casting doubt on meters or Bitcoins or Goldman Sachs because you can't touch them either. They're all social constructs, but social constructs are quite real for anyone participating in the society that constructed them.

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#98

Post by saudioger »

aserafini wrote: post #39
alex_young wrote: post #16

How about fedDigitalCash? It's crazy that I pay a few percent of every transaction to visa for no reason every time I buy anything in 2018

Yes, paying a few % on every transaction to move kilobytes of information over a network is absurd. The true cost is less than pennies but the EMV cartel led by VISA has successfully kept the price many orders of magnitude higher, employing anti-competitive tricks like: hiding the cost to consumers by contracually preventing retailers from increasing prices for VISA payments.

I don't think it's perfect by any means, but it's quite a bit more than simply moving kilobytes around.

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#99

Post by loceng »

cslarson wrote: post #66
geofft wrote: post #19

What is a "blockchain"? To me, a blockchain is a way of solving double-spend problems in a Merkle tree maintained by open distributed consensus, by using some scheme to resist Sybil attacks. The scheme is not necessarily proof-of-work, but the fact that there's a double-spend problem and you're solving it is key to the idea. If you don't have a double-spend problem because all your transactions commute (e.g., Certifi…

This really misses the picture of what's going on. Fedcoin could be coordinated by the federal but live on or be connected to a public smart contract platform where that, now digitised asset, could be used programmatically and interdependently with many other systems in a much more efficient and easy to assemble way than can now be done. This may not sound like a good idea to most on hn but it's at least new.

Would it have an incentivized structure?

Re: Former top official says Fed should ‘Maybe’ create ‘FedCoin’ to rival Bitcoin

#100

Post by MorbidCuriosity »

diegocerdan wrote: post #90
MorbidCuriosity wrote: post #56

Earlier quoted context omitted.

No cryptocurrency is a monetary system, they aren't even a functioning currency. For that to happen they would need to fulfill three functions that currently none do. Namely: A means of exchange A unit of account A store of value They satisfy the first but not the other two. I cannot know for sure what value my coins have on any given day, let alone what they are likely to be valued at by next year. Thus they do not…

Their value is so volatile because their total valuation is not big enough to make them stable. Multiply Bitcoin's or Ethereum's total valuation by 100 and suddenly you have a much more stable asset at the price range of gold. And being stable makes them way more valuable so their price would keep increasing just because of that. To solve proof-of-work consuming too much electricity, Ethereum is upgrading to proof-of…

Their value is so volatile because they have no intrinsic value, no government (that I am aware of) is demanding tax paid in a cryptocoin. There is also no mechanism for increasing the value of the coin, through a central bank interest rate. There's also no means to increase the supply (after mining runs out) to allow for economic expansion, eventually you will end up with run away inflation, with no mechanism to control it. Honestly they don't work as currencies, they are speculative assets underpinned by some interesting but largely redundant technology.

Proof of stake is built on trust, much like the financial system, so why reinvent the wheel for a corruptible ledger of a non-trustless, non-currency?

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