The Bubbly Bitcoin Thread -- Merged Threads

[goldbug9999]

20 hours ago, guest_northshore said:

'm sure you're aware that money creation isn't arbitrarily decided by central banks.

Youve heard of QE right ?.

[guest_northshore]

33 minutes ago, goldbug9999 said:

Youve heard of QE right ?.

I've read Mervyn King stating QE was intended to increase money supply and asset prices. People debate this and the mechanics but I wouldn't disagree on intent, only on whether they had/have arbitrary control over it. There's no point us having another where-does-money-comes-from discussion here.

[adamLancs]

2 hours ago, goldbug9999 said:

If you were start a new crypto right now or in the future, how would you propose to do a fairer distribution ?, if you just say have at it everyone, mine/bid away the youl almost certainly end up with the same highly skewed distribution as the whales dive in to bag large chunks of it, but it will be worse than bitcoin because the whales will be wall street guys rather than tech enthusiasts. You can see this on etherium where a good chuck of it was bought up in the early days by the hedge fund guy mike novogratz. I really don't see any signs of the kind of resentment and mutiny that you describe, other than you I don't see anyone else who is at all bothered, if you take for example this guy as being even remotely representative of the millennials just getting into it, its a non issue.

Bitcoin is going through a period of vulnerability here, I foresee this period going on for another 6 months or so until the layer 2/ side-chain projects start to appear on the scene, its first mover brand momentum will carry it that far but probably not much beyond that without these other projects staring to show that they can provide some serious scaling and utility.

I tend agree actually hence my previous point.

 

I don't have the answer. Ideally, as adoption tends to pick up slowly at the start and gradually accelerates as seen with Bitcoin, you would want the release of coins to follow a similar curve. In contrast, most coins are distributed in whole at the start, or in large part via mining... often before even a working product exists, or before widespread adoption. And that hegemony remains in place for the duration of the coin's existence.

I'm not really bothered from a personal standpoint, because I and others here have benefitted from this, but it seems obvious to me that it is fundamentally flawed. I'm pretty sure I'm not the only one that's mentioned it in this thread. That does not mean it can't be accepted by the masses, as has been demonstrated so far.

Yes side-chains for me is the most appealing way forward for crypto in general. From my first days discovering Bitcoin, I saw blockchain's nature as akin to a tree in which branches stem off branches and the whole thing becomes like a grand oak. The use of Lightning Network appears to be leaning towards keeping a single central branch, and centralizing many of the transactions, wallets, users at the expense of the very things Bitcoin was designed to protect, security, privacy, etc So, whilst the transactions will be secured to the blockchain, they will not be secured to the user, only the node that is acting on the user's behalf. (Centralized wallets, centralized banks etc.) I could be wrong. That's how it looks to me. Faster? Cheaper? Absolutely. Safe? Uhhhh... well, as soon as you send your money to a centralized service it is no longer safe, IMO, but that doesn't stop people using exchanges. Dash, Monero, IOTA, Lisk, Maid, etc there are plenty of different approaches to the scaling issue. They all seem to have inherent flaws and I don't doubt LN will be the same.

Incidentally a solution may come about by fusing some of these ideas together. It is early days. For me, the ICO movement this year blew the lid off a whole new can of worms, and 2018 is going to be very interesting indeed... I am (cautiously) excited.

[goldbug9999]

1 hour ago, adamLancs said:

The use of Lightning Network appears to be leaning towards keeping a single central branch, and centralizing many of the transactions, wallets, users at the expense of the very things Bitcoin was designed to protect, security, privacy, etc So, whilst the transactions will be secured to the blockchain, they will not be secured to the user, only the node that is acting on the user's behalf. (Centralized wallets, centralized banks etc.) I could be wrong. That's how it looks to me. Faster? Cheaper? Absolutely. Safe?

There may be technically some centralisation with LN, its kind of a "VPN" for transactions. Like wth VPN providers, you will hopefully have many to choose from, I presume most will charge fees in BTC so you wont be required to identify yourself and your funds are never at risk, worst case is that have to wait for a failed transaction chain to expire. At the end of the day it is trying to exploit the consolidation of small transactions, so some centralisation of resources is going to be part of the tradeoff. Many of the micro transaction capable bitcoin alternatives seem to use some sort of resource consolidation,  a masternode or supernode or something similar. Bitcoin/LN is as far as I can tell unique amongst these in that transaction authority is never fully delegated to any sub part of the network hence local resource optimisation can occur without diluting the global consensus.

Edited November 19, 2017 by goldbug9999

[Eddie_George]

 

5 hours ago, adamLancs said:

The use of Lightning Network appears to be leaning towards keeping a single central branch, and centralizing many of the transactions, wallets, users at the expense of the very things Bitcoin was designed to protect, security, privacy, etc So, whilst the transactions will be secured to the blockchain, they will not be secured to the user, only the node that is acting on the user's behalf. (Centralized wallets, centralized banks etc.) I could be wrong. That's how it looks to me. Faster? Cheaper? Absolutely. Safe? Uhhhh... well, as soon as you send your money to a centralized service it is no longer safe, IMO, but that doesn't stop people using exchanges.

Lightning Network transactions are as secure as those on-chain.

https://medium.com/@AudunGulbrands1/lightning-faq-67bd2b957d70

Edited November 19, 2017 by Eddie_George

[adamLancs]

30 minutes ago, Eddie_George said:

 

Lightning Network transactions are as secure as those on-chain.

https://medium.com/@AudunGulbrands1/lightning-faq-67bd2b957d70

The transactions are secure, but relying on a third-party to store your coins is not.

[Jonesy74]

16 minutes ago, adamLancs said:

The transactions are secure, but relying on a third-party to store your coins is not.

That’s not what happens as far as I understand it (but I could be wrong)

[Eddie_George]

3 minutes ago, adamLancs said:

The transactions are secure, but relying on a third-party to store your coins is not.

I don't understand what you mean. You're not relying on anyone to store your coins, they're stored in a multi-sig smart contract. If you run a full-node, you don't need to use a monitoring service, and even then the monitoring service cannot steal your coins.

Hopefully we will see "light" Lightning wallets on mobile devices be able to interface securely with your full node running at home, so paying for that coffee with the Lightning Network will be simple and almost free.

[adamLancs]

3 minutes ago, Eddie_George said:

I don't understand what you mean. You're not relying on anyone to store your coins, they're stored in a multi-sig smart contract. If you run a full-node, you don't need to use a monitoring service, and even then the monitoring service cannot steal your coins.

Hopefully we will see "light" Lightning wallets on mobile devices be able to interface securely with your full node running at home, so paying for that coffee with the Lightning Network will be simple and almost free.

Yes for the duration of the payment channel. I understand that the transactions are trustless.

However, my understanding is... that I still have to send my money somewhere, and I still have to receive it. Those two transactions must get stored on the blockchain. That means Bitcoin network transaction fees as usual. If I want to avoid those transaction fees, then I have to use LN to setup a payment channel. But to do that, requires two transactions on the network also. So it is only worthwhile to setup a payment channel, if you are pulling a lot of people into the loop so to speak - or if you are facilitating a lot of transactions in one go. This is where the nodes come from. And you will have multiple nodes or providers interfacing with the LN, because it is not going to be worthwhile for users themselves to setup payment channels for most things. Instead, it will make more sense for users to store their funds in an online wallet that interfaces with the LN. And that is where the trust comes in.

[goldbug9999]

9 hours ago, adamLancs said:

The transactions are secure, but relying on a third-party to store your coins is not.

When you send your funds to a payment channel they are in a time locked transaction that will revert the funds to you in the event of any funny business in the part of any of the LN between you and the recipient. LN nodes cannot steal your funds, worst case they can cause them to be locked up until the timelock kicks in, the node would be heavily penalized for allowing that to happen though.

Edited November 20, 2017 by goldbug9999

[goldbug9999]

9 hours ago, adamLancs said:

Yes for the duration of the payment channel. I understand that the transactions are trustless.

However, my understanding is... that I still have to send my money somewhere, and I still have to receive it. Those two transactions must get stored on the blockchain. That means Bitcoin network transaction fees as usual. If I want to avoid those transaction fees, then I have to use LN to setup a payment channel. But to do that, requires two transactions on the network also. So it is only worthwhile to setup a payment channel, if you are pulling a lot of people into the loop so to speak - or if you are facilitating a lot of transactions in one go. This is where the nodes come from. And you will have multiple nodes or providers interfacing with the LN, because it is not going to be worthwhile for users themselves to setup payment channels for most things. Instead, it will make more sense for users to store their funds in an online wallet that interfaces with the LN. And that is where the trust comes in.

My understanding is that its sort of like a prepayed visa card.You would load an amount into a channel and then fund multiple small transactions from it, but the channel cannot steal your funds (or more accurately it cannot prevent the funds being returned to you in the event that the channel misbehaves).

[adamLancs]

6 minutes ago, goldbug9999 said:

My understanding is that its sort of like a prepayed visa card.You would load an amount into a channel and then fund multiple small transactions from it, but the channel cannot steal your funds (or more accurately it cannot prevent the funds being returned to you in the event that the channel misbehaves).

Yeah, I think I misunderstood a little bit. That seems like it makes more sense. It is not clear yet, how it will be reliable to accept $5 for a coffee for example, without closing the payment channel.

[doahh]

1 hour ago, adamLancs said:

Yeah, I think I misunderstood a little bit. That seems like it makes more sense. It is not clear yet, how it will be reliable to accept $5 for a coffee for example, without closing the payment channel.

My understanding from reading the article that Eddie gave is that there is no need to close the channel, in fact it looks like keeping it open is encouraged. I see it this way:

1. I make a transaction a day with a retailer and so I set up a channel. I pay the bitcoin transaction fee to create the channel. This is worth it for me because I make so many transactions;
2. Each day the transactions build up in the channel;
3. For each transaction a smart contract is created;
4. Full nodes can read into the smart contracts and therefore verify that a payment has been made, the channel does not need to be closed.

For other people who also transact with the retailer but maybe only once per year, it is not worth setting up their own channel as they need to pay a blockchain Tx fee so:

1. They join my channel and create their own smart contracts with the retailer;
2. I charge them a small fee for the use of my channel.

Closing the channel will sum the transaction and write back to the blockchain.

Edited November 20, 2017 by doahh

[Eddie_George]

10 hours ago, adamLancs said:

Yes for the duration of the payment channel. I understand that the transactions are trustless.

However, my understanding is... that I still have to send my money somewhere, and I still have to receive it. Those two transactions must get stored on the blockchain. That means Bitcoin network transaction fees as usual. If I want to avoid those transaction fees, then I have to use LN to setup a payment channel. But to do that, requires two transactions on the network also. So it is only worthwhile to setup a payment channel, if you are pulling a lot of people into the loop so to speak - or if you are facilitating a lot of transactions in one go. This is where the nodes come from. And you will have multiple nodes or providers interfacing with the LN, because it is not going to be worthwhile for users themselves to setup payment channels for most things. Instead, it will make more sense for users to store their funds in an online wallet that interfaces with the LN. And that is where the trust comes in.

This is how I understand it:

Payment channels, once open, can stay open indefinitely, the only reason to close a channel is if you want to cash out the Bitcoin for fiat for example, or the merchants that you use don't use the Lightning Network.

One analogy is that the bitcoin you allocate to your Lightning Network channel is your current account, with your bitcoin stored in your main wallet being your savings account.

These channels are not restricted to operate just between two parties, they can interact with anyone else who has an open channel and can carry out an unlimited number of transactions that will have tiny fees (strong competition will cause Lightning fees to trend to zero). e.g. your channel could be used to transact with Tesco, WHSmith, Boots, M&S, and your employer, if they all had channels open.

This will reduce the number of trivial transactions that need to be settled on-chain and so reduce fees significantly.

It's appreciated that the Lightning Network on its own cannot scale to the whole world's population (without raising the block-size to 100MB+), but recently a new paper suggests that a further trustless intermediate layer between the Bitcoin blockchain and the Lightning network could bring this within reach.

Edited November 20, 2017 by Eddie_George

[adamLancs]

47 minutes ago, doahh said:

My understanding from reading the article that Eddie gave is that there is no need to close the channel, in fact it looks like keeping it open is encouraged. I see it this way:

1. I make a transaction a day with a retailer and so I set up a channel. I pay the bitcoin transaction fee to create the channel. This is worth it for me because I make so many transactions;
2. Each day the transactions build up in the channel;
3. For each transaction a smart contract is created;
4. Full nodes can read into the smart contracts and therefore verify that a payment has been made, the channel does not need to be closed.

For other people who also transact with the retailer but maybe only once per year, it is not worth setting up their own channel as they need to pay a blockchain Tx fee so:

1. They join my channel and create their own smart contracts with the retailer;
2. I charge them a small fee for the use of my channel.

Closing the channel will sum the transaction and write back to the blockchain.

So, everybody can share channels and be happy, but as I understand it... there is no real proof of payment until the final transaction is broadcast *on* the bitcoin blockchain. Everything is really just a promise to pay. So again, how do you stop me from buying a coffee and promising you $5 in my payment channel, then pulling out of my promise when I walk out of the shop? You are only guaranteed your $5 if I close the payment channel whilst in the shop. Only when you see $5 worth of Bitcoin come to your Bitcoin wallet do you know for sure that you have been paid. Everything in the payment channel is reversible, isn't it?

[adamLancs]

39 minutes ago, Eddie_George said:

This is how I understand it:

Payment channels, once open, can stay open indefinitely, the only reason to close a channel is if you want to cash out the Bitcoin for fiat for example, or the merchants that you use don't use the Lightning Network.

One analogy is that the bitcoin you allocate to your Lightning Network channel is your current account, with your bitcoin stored in your main wallet being your savings account.

These channels are not restricted to operate just between two parties, they can interact with anyone else who has an open channel and can carry out an unlimited number of transactions that will have tiny fees (strong competition will cause Lightning fees to trend to zero). e.g. your channel could be used to transact with Tesco, WHSmith, Boots, M&S, and your employer, if they all had channels open.

This will reduce the number of trivial transactions that need to be settled on-chain and so reduce fees significantly.

It's appreciated that the Lightning Network on its own cannot scale to the whole world's population (without raising the block-size to 100MB+), but recently a new paper suggests that a further trustless intermediate layer between the Bitcoin blockchain and the Lightning network could bring this within reach.

It's a good analogy. I am hoping it works as you describe.

[Eddie_George]

6 minutes ago, adamLancs said:

So, everybody can share channels and be happy, but as I understand it... there is no real proof of payment until the final transaction is broadcast *on* the bitcoin blockchain. Everything is really just a promise to pay. So again, how do you stop me from buying a coffee and promising you $5 in my payment channel, then pulling out of my promise when I walk out of the shop? You are only guaranteed your $5 if I close the payment channel whilst in the shop. Only when you see $5 worth of Bitcoin come to your Bitcoin wallet do you know for sure that you have been paid. Everything in the payment channel is reversible, isn't it?

No, there's very little chance of fraud. Lightning is similar to Bitcoin in that it's a clever blend of cryptography and game theory -- that's why it's so exciting.

I believe that if you try to renege on a payment, you risk losing your whole channel balance, so that's a big incentive to play fair.

See if this article helps explain:  The Lightning Network in the Old West

[goldbug9999]

32 minutes ago, adamLancs said:

So, everybody can share channels and be happy, but as I understand it... there is no real proof of payment until the final transaction is broadcast *on* the bitcoin blockchain. Everything is really just a promise to pay. So again, how do you stop me from buying a coffee and promising you $5 in my payment channel, then pulling out of my promise when I walk out of the shop? You are only guaranteed your $5 if I close the payment channel whilst in the shop. Only when you see $5 worth of Bitcoin come to your Bitcoin wallet do you know for sure that you have been paid. Everything in the payment channel is reversible, isn't it?

You cannot do such a repudiation as I understand it - if the channel is closed by any party it will net out the current position onto the blockchain.

[doahh]

34 minutes ago, adamLancs said:

how do you stop me from buying a coffee and promising you $5 in my payment channel, then pulling out of my promise when I walk out of the shop?

The transaction is stored in a multi-signature wallet signed by you and the retailer. I therefore assume that you can't cancel the agreement unilaterally.

[jiltedjen]

New all time high

[markyh]

47 minutes ago, jiltedjen said:

New all time high

$10k  By Christmas?

[ChumpusRex]

7 hours ago, adamLancs said:

 You are only guaranteed your $5 if I close the payment channel whilst in the shop. Only when you see $5 worth of Bitcoin come to your Bitcoin wallet do you know for sure that you have been paid. Everything in the payment channel is reversible, isn't it?

Everything that goes on in the channel is subject to change. However, it is possible to structure transactions such that there is no need for trust.

Consider the following:

Alice goes to a coffee shop, and opens a channel, containing $100. The $100 is transferred to a multisig address, requiring co-signature from both Alice and Barista. Effectively, she has put the money behind the bar as a tab.

She orders a coffee. Alice signs a transaction for $5 to the coffee shop and a $95 refund, and then presents that transaction to the barista. The Barista could sign the transaction and broadcast it, closing the channel. Or keep the partially signed transaction on one side and wait and see what happens.

Alice orders another coffee. She signs another transaction for $10 to the coffee shop and a $90 refund, and presents it to the barista. The barista could sign the transaction ....

After the 3rd coffee and pecan slice, she signs a transaction for $20 and an $80 refund. You get the idea.

The point is that at any point, the most recent transaction signed by Alice is proof of available funds. The barista merely needs to sign the transaction to claim the funds and close the channel. Additionally, only one of these staged transactions can ever be valid on the blockchain. The barista cannot sign the $5 transaction, present it to the bitcoin network, and then do the same with the $10 transaction. In this case, the barista waits until such time as he wishes to close the tab, and broadcasts only the final transaction presented by Alice.

In the event that Alice makes no purchases, and the barista refuses to close the channel, then the channel has a time out, at which point, the multisig requirement expires, and the channel's funds can be recovered by a single signature from Alice.

[adamLancs]

Thanks for taking the time with the responses. It's a lot clearer now. The bar tab, is another good analogy. Does anybody know when we're likely to see it in action?

[Eddie_George]

37 minutes ago, adamLancs said:

Thanks for taking the time with the responses. It's a lot clearer now. The bar tab, is another good analogy. Does anybody know when we're likely to see it in action?

You can play with it now on the testnet, but Rusty Russell, who works on Lightning reckons there'll be an alpha, and possibly beta release on the main-net before the end of the year.

 

[evetsm]

9 hours ago, adamLancs said:

Thanks for taking the time with the responses. It's a lot clearer now. The bar tab, is another good analogy. Does anybody know when we're likely to see it in action?

Layer transactions certainly makes a mockery of on chain scaling.  imo. Once this kicks in we will wonder what all the fuss was about ? Then all sorts of combinations of smart contracts, structured payments, true anonymity will be layered into the mix to make a complete financial system, all underpinned by the secure, trustless Bitcoin base layer.

And hopefully then without access to the fiat cookie jar, govts shrink to the bare minimum and stay honest. We can wish.

Ps : and LN has no ordained monopoly. There could conceivably be many payment networks, maybe even not all on the same layer. I think already others are being developed in competition.  This is OPEN source ! It makes me think that bcash is actually the proprietary system, sold as "Satoshi's Vision" to dupe the ignorant , that will lock you into a monopoly of miners and a committee.

Edited November 21, 2017 by evetsm