Decentralized minting of separate virtual currencies (colored alts) on the Bitcoin blockchain.

[Simon de la Rouviere]

Hi! Looking for thoughts on this concept. With the recent rise in altcoins, its imperative we design a more secure way. Coingen is awesome, but it leaves around thousands of badly secured alt-chains. Here is one concept.

---

"Colored altcoins can be minted on the Bitcoin blockchain in a decentralized manner through the donation (or 'sacrifice') of Bitcoin to miners: turning those Bitcoin into a new colored altcoin at pre-determined rate."

In the past 2 years, plenty of new alternative cryptocurrencies (altcoins) have been created (namecoin, litecoin, dogecoin, etc), resulting in separate blockchains, and a distribution of hashing power. As we are heading towards a future where each idea, theme, and person will have their own currency, there are some problems with having the value locked up in different altchains. The problem is mainly due to the fact there will be a long-tail of chains with small hashing powers that will be extremely vulnerable to attack.

Why?

Currently, private or personal currencies can be minted through colored coins. These coins are unfortunately centralised. If I mint 1million Simoncoin, it will invariably be in my control. If other people want them, they will have to pay me Bitcoin in exchange for the Simoncoins. In some cases, this is what is wanted, but it brings about trust in me to maintain it. The beauty of the traditional mining process is that it is freer, and more democratic. It gives people 2 ways to get involved with the currency: through contributing processing power to it OR buying it from someone who has already contributed processing power to it. The pre-determined rate at which it is minted AND the fact that it is not to the benefit of a centralised entity allows trust (and invariably value) to more easily flow into it. What if the 21 million Bitcoin were minted instantly in the beginning? It also means that the entity/theme behind it (be it Simoncoin, a meme, a band, etc) have more incentive to make their currency work as they have to keep its network effect growing. Admittedly I'm trying to articulate a difficult concept. If some currency (or stock) only 'represented' an entity (decentralized), instead of being 'backed' by the entity (centralized), its value will be more. The psychological barriers to entry feels lower: because people are taking part collectively in the concept.

So, a future where colored coins can be minted in a decentralized manner, whilst simultaneously keeping the hashing power on one chain, solves the problem where the myriad of new altcoins will have to worry about keeping their chain secure and running smoothly. It should also be beneficial to the network.

How?

This scheme works by looking at Bitcoin (the currency) as a proxy for hashing power. By donating to Bitcoin to miners, you are contributing hashing power as a proxy for a new colored alt. For each block, depending on how many people donated to a specific colored alt (say Simoncoin), you are rewarded proportionally at a pre-determined rate.

As the idea is in a conceptual phase, I have not delved too deeply into the technical aspects of it, so I'm going to be using some 'psuedo-txes' to explain some parts of the technical implementation.

Let's create Simoncoin. In block 400000, there is a genesis tx that specifies a standard monetary policy: 50 initial coins, 210k halving: something like "OP_RETURN gsimoncoin50210000".

From the next block, Bitcoin donations can be transmogrified into Simoncoin. If only I am mining it, and I donate 0.00001 BTC to the block, I will receive all of the 50 Simoncoin. If 2 people donated 2 BTC each, it will be split 25, 25. As you can see, altcoins which are popular will have more competition in terms "proxy hashing power", meaning more Bitcoin is donated per block. Once the halving block is reached, less Simoncoin will be available to split up between the miners.

The donation tx should (probably) specify for what colored alt it is for, and which address the reward should go to (thinking quickly in terms of technical specification).

What about miners, mining their own donations?

If a miner donates 5 btc for Simoncoin, and he mines the block, he will get the 5BTC AND a large portion of Simoncoin, not really 'donating' or 'sacrificing' the Bitcoin.

I need some help thinking about this, but I don't see it as a big issue. Miners will have incentive to include all the colored alt minting donations as it will collectively be a bigger reward than keeping out other donations for a specific alt reward. In other words, all the transaction fees will be greater than the value of the colored alt rewards (that's what I'm thinking at least). Using Bitcoin as proxy hashing power also means that unlike traditional mining, ALL participants get their fair share. It's as if all Bitcoin miners (or miners part of a pool) got their fair share, even if they did not solve the block.

There are thus cases where a miner will donate some BTC and re-earn it as reward, but that won't be the intent. They were just lucky. If they want to continue minting the colored alt they'll have to respend the Bitcoin as donation anyway, potentially losing it to other miners.

There should also be a time-based incentives as well, mainly that IF no one contributed Bitcoin to Simoncoin for that block, the 50 Simoncoin is lost. This means miners won't just wait for a next block to win the reward.

Alternatively, similarly to proof-of-stake, "coin-age" could be used in some way. But you don't want to detriment users who buy bitcoin to mint quickly to alts.

Security

This process is beneficial to Bitcoin. It means hashing power don't have to distributed across alt-chains. One of the reasons why some miners turn to other altcoins are due to profitability. ie the altcoins are worth more than the hashing power when turned back into BTC or Fiat, compared to the hashing power being spent on Bitcoin itself. This process solves this. Miners will contribute to Bitcoin's success, but ALSO be able to rake in with the profitability of colored alts. If my small FPGA is earning 0.0001 Bitcoin per block, and I'm the only one mining Simoncoin, I will receive my full reward as IF I was the only one mining Simoncoin (ie taking the 0.0001 and donating it). It means like any altcoin, you are competing with the people hashing with you on that altcoin, but that hashing power now ALSO contributes to keeping the whole ecosystem of cryptocurrencies secure.

Strain on the network?

If this starts working, there will be a lot more donations per block, for each colored alt that exists. Miners will be happy as it is a lot more money, but it could push the transactions per second quite a lot higher, as for someone that is mining a coin will have to donate BTC for EACH block to be able to receive the reward.

A purer version could be where the mining rewards go straight as donations for the next block, paying/minting new colored alt addresses. In other words, miners also turn into minting pools. Your payout address is a donation directly to the next block, whilst simultaneously generating colored alts. I don't know if this is even possible.

SPV?

Personal currencies need to be used as easily as Bitcoin. Thanks to SPV, you don't need the whole blockchain to transact. It's unclear whether this scheme will work.

Bitcoins are being re-used again and again to create new currencies?

Yes. Value is subjective. Bitcoin acts here as the token for the security of the public ledger it moves upon. It's turning the hashing power into the system of the cryptographic shared ledger into support for additional currencies. It's like blood, keeping the system pumping.

So. A request for comments: please. I have to do my own research into colored coins first to think up technical implementations. If anyone wants to help design this scheme in a feasible manner, I would love your help!

Any questions are also welcome! Would love to hear your thoughts.

[Uwe Cerron]

Hey Simon,

This reminds me of  the creation of Mastercoin itself. I am unclear about miners mining their own donations, if they get the 5btc + random quantity of Simoncoin, wouldn't the 5 btc return to them colored or are you planning on coloring satoshies to be a fixed value of Simoncoin?

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[Simon de la Rouviere]

Hey Uwe!

I was looking at Mastercoin and wondering in what way it can become even more decentralized. I also wondered in what way the blockchain's hashing power could be routed for the security of alt-chains.

Pure colored coins is the one extreme, where the (initial) control AND issuance is controlled by a single entity.

Mastercoin's control was still centralised, but had somewhat decentralized issuance. (Felt more like: "Get in now, before it's worth a lot!", which left some odd taste in my mouth).

Then there needed a way to mint colored coins without someone in control of it, and with decentralized issuance, and that's what I've conceptually put forth.

The 5BTC itself would not be colored. It is put into the coinbase as transaction fees. That action of donating should then be tied to a protocol that determines the new value of Simoncoin that is generated for that block (for the amount you donated). 

Admittedly, I'll have to start work on the technical implementation, to make sure if it is technically feasible.

Regarding miners. They will get the rewards as well as the Simoncoin they wanted. I'm okay with this, if the intentions and incentives are there to keep it honest. If you want Simoncoin, you'll have to donate Bitcoin before knowing which miner will mine the donation. A miner CAN try and mine blocks where they themselves only donate say a very small amount of BTC to get the FULL Simoncoin reward. In other words, they are blocking all "proxy" hashing power from contributing to a colored alt. But, chances are they will receive MUCH more if they include all fees. In other words: strong arming it will result in less gain, than just being honest. There could be still some holes here, and if someone can see through it, would love to know.

I'm full-time busy with other stuff, but I intend to look at the technical implementation fully at the end of January.

[Yoni Johnathan Assia]

The concept of decentrelized mining of colored coins is indeed very important for coloredcoins and still not clear. (though potentially proof of stake, and other forms of anti spam can be used to color mine)

I understand from your suggestion, that miners will be used to "mine" new coloredcoins, you reffer to a new type of miners though, are they related to bitcoin mining ? And if they are, then why ? If you reffer to basically anyone running a software to color (mint) a new color alt a miner, then it makes sense, we should find a suitable name for these type of miners - Color miners ? 

The fact that bitcoins are being donated, are proof of stake (or proof of identity), and act as anit-spam, so people can't simply "mine" without any risk.

Maybe suggesting a continious proccess of "mastercoin" generation, which is predefined, and in which the bitcoins used for coloring are returned to the donators on a realtive basis to how many donators they are, so it is defined that anyone sending 1 BTC gets 100 simoncoins at first and then also 1 BTC/numbers of people who send X BTC, after X time anyone who send 1 BTC gets 50 simon coins, and back BTC/numbers of people who send X BTC .

Would be happy to explore this concept more, and even donate 10-50 BTC to test it, so people have incentive to join.

(the more people donate the more people get)

[Simon de la Rouviere]

Thanks for replying Yoni.

> The concept of decentrelized mining of colored coins is indeed very important for coloredcoins and still not clear. (though potentially proof of stake, and other forms of anti spam can be used to color mine)

Yeah. This concept is actually rather similar to proof of stake, but it's not for block signing. It's similar in that coins are being used, but that instead of getting back the same currency (as in Peercoin), the alt is generated.

> I understand from your suggestion, that miners will be used to "mine" new coloredcoins, you reffer to a new type of miners though, are they related to bitcoin mining ? And if they are, then why ? If you reffer to basically anyone running a software to color (mint) a new color alt a miner, then it makes sense, we should find a suitable name for these type of miners - Color miners ? 

I like the term color miners! You could be both a Bitcoin miner AND a color miner. The software to color mine would be probably be separate though. Currently the idea is that you donate BTC per block to the colored alt you want to mint (which then acts as 'proxy hashing power'. Setting up software to automatically do this (and increase the amounts automatically to compete with other color miners could be done). You could however still mine Bitcoin. Earning say 0.00001 per block could be donated to a new colored alt that you want to mint. If you donate that 0.00001 and no one else is 'color mining', you get the full reward. So you get to do both: providing security to Bitcoin AND fully participating in an altcoin as if a community were the only people mining it (hope I'm making this clear).

> The fact that bitcoins are being donated, are proof of stake (or proof of identity), and act as anit-spam, so people can't simply "mine" without any risk.

Do you mean compared to other proof of stake methods, where it is only a transaction back to yourself, you take on extra risk by actually letting go of your BTC. Yeah true. It is more risky. You could use coin age similarly to peercoin, but it brings in other economical and philosophical factors that is difficult to figure out at this stage. Have to think about it more. But yeah, current method is more risky. Probably a bit too much.

> Maybe suggesting a continious proccess of "mastercoin" generation, which is predefined, and in which the bitcoins used for coloring are returned to the donators on a realtive basis to how many donators they are, so it is defined that anyone sending 1 BTC gets 100 simoncoins at first and then also 1 BTC/numbers of people who send X BTC, after X time anyone who send 1 BTC gets 50 simon coins, and back BTC/numbers of people who send X BTC .

I first thought about it in a similar way, but not entirely like that. I like it. It takes out some of the issues of trying to tack onto the blockchain and requiring separate software to color mine, timing btc donations, etc. You could decrease the numbers of coins per BTC based on various metrics: time (as with Bitcoin), amount BTC donated (after 100 btc, the rate halves), number of individual minting transactions (after 100 000 minting transactions, it halves), etc.

The problem however with a method like this, is that there will always be a price ceiling until all the coins are minted. The value can't float until it's been all mined. For example:

For 2 years (time-based): 1:500 Simoncoin. So, let's assume demand increases, people will simply mint it, instead of exchange it. Unless someone wants to sell their Simoncoin for less. So the max price will always be 1:500 for that period.

Next 2 years: 1:250 Simoncoin. Again: the max rate you'll get is 1:250.

And so on, until it is all minted and then it starts floating.

2 things I like about the method I propose (although it seems like more work to properly implement), is that it benefits Bitcoin. A lot. Although it will increase transaction substantially, it rewards miners handsomely, and hopefully it puts most of the hashing power of the crypto-network to Bitcoin, decreasing security issues for small altcoins.

But there's a lot more thinking required. I quite like your proposal Yoni.

> Would be happy to explore this concept more, and even donate 10-50 BTC to test it, so people have incentive to join.

I'm finishing my masters next week, and I plan to my time at least for the next few weeks on this problem. I have some BTC saved up from last year, so I can take a break and work on this.

Cheers!

[Manuel Aráoz]

Interesting discussion! You might find this wiki article useful: https://en.bitcoin.it/wiki/Proof_of_burn

[Simon de la Rouviere]

Hi Manuel. Yes, proof of burn is interesting. It acts in a similar manner, but doesn't destroy the coins completely: only the owner loses it.

[Yoni Johnathan Assia]

Basically to create color mining we just need to define :
Proof of something - that can be encoded in the block and be unique so it cannot be "attacked".
The proof needs to be embedded in a transaction, and then others can see it an issue the color based on the last block proof of X.

So all color miners download software, they then create a transaction with to a specific address and have a unique identifier embedded into the op_return that cannot be reproduced by other people, then in the next block the color mining software scans that address and issues color to everyone on their originating address ?

Maybe proof of identity can work ? Connect your facebook as proof ?

[Simon de la Rouviere]

So, in this case, the color mining software is the issuer?

Going to take next week to educate myself fully, to think more deeply about this.

[Jorge Timón]

What's the point of "colored alts"?
Why do you want a p2p currency inside another p2p currency if the
properties are going to be the same?

B2B, local currencies, mutual credit, backed currencies, private
currencies...all this makes a lot of sense to me and they can be
implemented with colored coins. All of them need centralized issuers.

But what's the advantage of having an additional p2p currency in the
same chain besides the hostcoin? What can you change besides the max
amount and having a worse divisibility?
Why would people use them if the main differences are that it would be
less SPV-friendly than the hostcoin and you can't pay fees with it?

Or is it only for the pump and dump?

--
Jorge Timón

http://freico.in/

[Yoni Johnathan Assia]

The answer is in your question :

B2B, local currencies, mutual credit, backed currencies, private
currencies

Any type of premutation of the above, for example a Canadian Lawyers Group, launching and minting a cadcoin-clg, where every new lawyer (passes bar exam as proof) gets 1000 coins.

As another example, any additional type of "proof of" can be added on top of bitcoin, which can add different functionality and different usage, classic example would be "proof of identity", mint 1000 new coins to anyone with a facebook account,

[Simon de la Rouviere]

Hey Jorge.

I'm trying to think of a future where there might exist millions of cryptocurrencies (minted for various purposes). What would the best technical implementation for that be? The current way of minting pure altcoins doesn't seem like it would be the most secure, because you will have very long tail of chains with low hashing powers, not making it secure. So instead, an ideal approach would be to have the security of altcoins be focused. One blockchain thus acts as the timestamping, security layer (in this case: Bitcoin), while you have (hopefully SPV-friendly) messaging protocols on top of it for any form of currency/asset.

[Jorge Timón]

On 1/23/14, Yoni Johnathan Assia <yoni....@gmail.com> wrote:
> The answer is in your question :
> B2B, local currencies, mutual credit, backed currencies, private
> currencies
>
> Any type of premutation of the above, for example a Canadian Lawyers Group,
> launching and minting a cadcoin-clg, where every new lawyer (passes bar
> exam as proof) gets 1000 coins.
>
> As another example, any additional type of "proof of" can be added on top
> of bitcoin, which can add different functionality and different usage,
> classic example would be "proof of identity", mint 1000 new coins to anyone
> with a facebook account,

Please, read my post with more attention, just after the sentence you
quote: "All of them need centralized issuers".
It seems to me that your examples also need centralized management.
I have talk to many complementary currency advocates and I don't know
of any B2B, time bank or local or private currency that can operate in
a fully-p2p manner like bitcoin.
They usually need a dynamic supply and not a fixed or deterministic one.

On 1/23/14, Simon de la Rouviere <tro...@gmail.com> wrote:
> Hey Jorge.
>
> I'm trying to think of a future where there might exist millions of
> cryptocurrencies (minted for various purposes).

I envision a future with more currencies than people, but not
necessarily many p2p currencies, probably just a few of them.
Probably I should clarify my terms.
By cryptocurrency I mean something broader than p2p currency.
For example, digicash was a centralized cryptocurrency. Ripple is a
cryptocurrency but not a p2p currency (because the consensus system is
not really trust-less p2p), NXT is not a p2p currency (proprietary
software, therefore not trust-less).

> What would the best
> technical implementation for that be?

In the present and the past, merged mining is the way to go, but
people seem to prefer to maintain them separated to make them more
speculative or just for "anti-ASIC" stupidity (there's no algorithm
for which specialized hardware cannot be created).
If scamcoiners were rational, they would merged mine their scrypt
altcoins with litecoin at least.

> The current way of minting pure
> altcoins doesn't seem like it would be the most secure, because you will
> have very long tail of chains with low hashing powers, not making it
> secure. So instead, an ideal approach would be to have the security of
> altcoins be focused. One blockchain thus acts as the timestamping, security
>
> layer (in this case: Bitcoin), while you have (hopefully SPV-friendly)
> messaging protocols on top of it for any form of currency/asset.

For SPV-friendly colors you need soft/hard fork, like freimarkets or
an additional OP.
My point is...Namecoin, peercoin, freicoin and maybe a few more need
to be separated from bitcoin because they have technical differences.
Most of the other coins are just for the pump and dump. They don't
offer anything interesting on their own chain, and they wouldn't offer
it inside bitcoin's chain neither.

I understand what you mean, but you didn't answered my question:
what's the point? why?
Why do we need say mousecoin in bitcoin's blockchain if it doesn't add
anything? Just different supply. Without fork, as said, also SPV
unfriendlyness.

> On Thursday, January 23, 2014 9:02:49 AM UTC+2, Yoni Johnathan Assia wrote:
>>
>> The answer is in your question :
>> B2B, local currencies, mutual credit, backed currencies, private
>> currencies
>>
>> Any type of premutation of the above, for example a Canadian Lawyers
>> Group, launching and minting a cadcoin-clg, where every new lawyer (passes
>>
>> bar exam as proof) gets 1000 coins.
>>
>> As another example, any additional type of "proof of" can be added on top
>>
>> of bitcoin, which can add different functionality and different usage,
>> classic example would be "proof of identity", mint 1000 new coins to
>> anyone
>> with a facebook account,

>> On Jan 23, 2014 12:23 AM, "Jorge Timón" <jti...@monetize.io <javascript:>>

>>
>> wrote:
>>
>>> What's the point of "colored alts"?
>>> Why do you want a p2p currency inside another p2p currency if the
>>> properties are going to be the same?
>>>
>>> B2B, local currencies, mutual credit, backed currencies, private
>>> currencies...all this makes a lot of sense to me and they can be
>>> implemented with colored coins. All of them need centralized issuers.
>>>
>>> But what's the advantage of having an additional p2p currency in the
>>> same chain besides the hostcoin? What can you change besides the max
>>> amount and having a worse divisibility?
>>> Why would people use them if the main differences are that it would be
>>> less SPV-friendly than the hostcoin and you can't pay fees with it?
>>>
>>> Or is it only for the pump and dump?
>>>
>>> --
>>> Jorge Timón
>>>
>>> http://freico.in/
>>>
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>
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[Simon de la Rouviere]

> I understand what you mean, but you didn't answered my question: what's the point? why? Why do we need say mousecoin in bitcoin's blockchain if it doesn't add anything? Just different supply. Without fork, as said, also SPV unfriendlyness. 

What it adds is the opportunity to hopefully have more decentralized currencies that won't be insecure. More hashing power for Bitcoin, securing ALL alts.

But.

It doesn't necessarily have to be in Bitcoin's blockchain. It's one such proposal where we can sustain a future where we have millions of currencies. I'm sure there are other ways to create decentralized, p2p, SPV-friendly, coins. But if we are going to have a long-tail of small coins with small networks, you can't do it the current way of having separate alts with separate chains. It's not secure enough. Merge mining IS a solution, and probably the best one currently (it's quick and easy to do), but it's still vulnerable to attack by the host.

btw. I need to read up on freimarkets too. Really interesting concepts packed in! Getting to it. So many exciting things happening the cryptocurrency space. Difficult to keep up. :)

[Jorge Timón]

On 1/23/14, Simon de la Rouviere <tro...@gmail.com> wrote:

>> I understand what you mean, but you didn't answered my question: what's
> the point? why? Why do we need say mousecoin in bitcoin's blockchain if it
> doesn't add anything? Just different supply. Without fork, as said, also
> SPV unfriendlyness.
>
> What it adds is the opportunity to hopefully have more decentralized
> currencies that won't be insecure. More hashing power for Bitcoin, securing
>
> ALL alts.
>
> But.
>
> It doesn't necessarily have to be in Bitcoin's blockchain. It's one such
> proposal where we can sustain a future where we have millions of
> currencies. I'm sure there are other ways to create decentralized, p2p,
> SPV-friendly, coins. But if we are going to have a long-tail of small coins

For example Freicoin when/if implements freimarkets. Still, why do we
need millions of p2p currencies at all?

> with small networks, you can't do it the current way of having separate
> alts with separate chains. It's not secure enough. Merge mining IS a
> solution, and probably the best one currently (it's quick and easy to do),
> but it's still vulnerable to attack by the host.

By Bitcoin miners? Miners that don't merge mine won't be able to
compete with MM miners because they get less income for the same work.
Attacking has an opportunity cost. Of course Bitcoin is still more
secure than Namecoin because its reward to miners is bigger, but it is
still more secure than if it was mined alone.
Far more secure:

http://bitinfocharts.com/comparison/difficulty-btc-nmc.html

> btw. I need to read up on freimarkets too. Really interesting concepts
> packed in! Getting to it. So many exciting things happening the
> cryptocurrency space. Difficult to keep up. :)

I'm glad that you're interested.
Still, our intention is to give support to many currencies and assets,
but I don't see the value of having more than one p2p currency in the
same chain.

Unless again it's for the pump and dump.

Why was namecoin created?

To have a p2p namespace.

Why was Peercoin created?

To experiment with PoS.

Why was Litecoin created?

Because GPU mining was here and CPU miners wanted to keep mining.
Also called "foo-hardness wankery" by some bitcoin wizards.

Why was Freicoin created?

To have a demurrage p2p currency.

Why are most of the rest altcoins were created?

For the pump and dump or "hardness" stupidity.

My question is then, why these guest altcoins will be created?

Hardness stupidity gets ruled out because they will just have the same
PoW the hostcoin.
Will it be only for the pump and dump?

I think pubmp and dump altcoins will eventually stop. When people have
lost enough money and coingen produced enough scams, this madness will
stop. Maybe I'm too optimistic...

Forget about altcoin's security.
What can be the motivation to create a guestcoin?

In mastercoin the MSC are supposed to be the base of the economic
perpetum mobile (EPMs) dacoinminster dreams of: for example, a p2p
asset pegged to the price of oil without any oil backing.
If they ever implement their goals (p2p markets with these EPM) in
their current parasitic and non-scalable form, we will see they were
wrong (or right).
Probably it had more to do with getting funding for his project.

But how will future guestcoins promise "investors" they will get rich
by becoming an early adopter of the next shitcoin, if the guestcoins
have exactly the same technical properties as the hostcoin and anyone
can just create a shitcoin for a small network fee?

I hope this time I've made my point and my question more clear.

[Simon de la Rouviere]

> Still, why do we need millions of p2p currencies at all?

As we've seen with Dogecoin: a p2p currency doesn't have to compete on technical merits. Owning a dogecoin is a more quantifiable 'share' in the network effect of the doge meme, and what the community stands for. With the blockchain, we can now mint verifiable secure 'currencies' around any network. And because the barrier to entry to affiliation is now so low, owning a currency is simple a vote on what network you want your value to reside with. A scarce resource can now be applied to any network of any size.

Extrapolating upon this: it means that we will see currencies being minted for anything and everything. Not all of them have to have million-dollar+ networks. We can have personal coins: an investment in my network effect. We can have city-coins: an investment in the network of a city, etc. We can even go smaller: an investment in news, articles. Our imagination is the only limit. As long these coins float with each other (and it's very easy to do), holding one coin over the other is simple a personal statement of where you want your value to reside.

I've written some more on this:

http://simondlr.com/post/70089813484/in-the-future-everyone-will-have-their-own

http://simondlr.com/post/74046640303/personal-coins-and-agency

[Yoni Johnathan Assia]

I share the same thoughts as Simon.
Currency is communication, love coins, respect coins, fear coins, most of them will be decentrelized issue based on proof of X

--

[Jorge Timón]

On 1/23/14, Simon de la Rouviere <tro...@gmail.com> wrote:
>> Still, why do we need millions of p2p currencies at all?
>
> As we've seen with Dogecoin: a p2p currency doesn't have to compete on
> technical merits. Owning a dogecoin is a more quantifiable 'share' in the
> network effect of the doge meme, and what the community stands for. With
> the blockchain, we can now mint verifiable secure 'currencies' around any
> network. And because the barrier to entry to affiliation is now so low,
> owning a currency is simple a vote on what network you want your value to
> reside with. A scarce resource can now be applied to any network of any
> size.

"Shares" of a public domain meme? Come on...
I think it's the prefect example of altcoin stupidity and pump and dump.
Wow. To the moon.

> Extrapolating upon this: it means that we will see currencies being minted
> for anything and everything. Not all of them have to have million-dollar+
> networks. We can have personal coins: an investment in my network effect.
> We can have city-coins: an investment in the network of a city, etc. We can

I think people and towns work better with the scheme they usually work.
Personal credit, mutual credit community currencies, mutual credit b2b
currencies, backed currencies.
Why would they need volatility and a fixed quantity?
Look, I think I've been the first person to advocate for multiple
currencies in one chain (loook at my first post on bitcointalk
https://bitcointalk.org/index.php?topic=2910 ), but don't confuse
"currency" with "coin"/"p2p currency". Coins are not always better,
they're volatile, they don't give the currency managers the qualities
they need...

> even go smaller: an investment in news, articles. Our imagination is the
> only limit. As long these coins float with each other (and it's very easy
> to do), holding one coin over the other is simple a personal statement of
> where you want your value to reside.
>
> I've written some more on this:
> http://simondlr.com/post/70089813484/in-the-future-everyone-will-have-their-own
> http://simondlr.com/post/74046640303/personal-coins-and-agency

Well, it seems we have a very different vision of the future and about
what currencies serve for.
Currencies are media of exchange, that's what they are for.
Using coins to represent "shares on personal statements" just doesn't
make any economic sense to me.
I don't think we need millions of speculative investments or how that
would benefit society.

I predict that the altcoin madness will eventually stop, while you
predict this is only the beginning.
Time will tell who is right, but remember, for scammers to keep
creating scamcoins, you need fools to keep buying them. When more of
them die and people suffer real pain for it, they will think twice.
Since you're proposing a "new better way to keep with the madness", I
assume you don't see it as madness, but you haven't answered to my
question yet. WHY? WHAT FOR?
I don't think "because dogecoin and catcoin exist" answer my question.
If you ask me why those exist, I've already said I think it's just for
the pump and dump, for meaningless speculation. For some people to get
rich fast.
No, please, WHY do you want people to create a million more of those?

By the way, if you're interested in personal monies, I suggest you dig
a little bit into the Ripple *concept* (Ryan Fugger, way before Ripple
Labs, Opencoin Inc and XRP). I recommend the old wiki:

http://archive.ripple-project.org/
http://archive.ripple-project.org/Main/Concept

Personal currencies, not personal "coins".

[Simon de la Rouviere]

> No, please, WHY do you want people to create a million more of those?

Relevant points Jorge. I'll try my best to explain.

Personally, the reason why I'm so excited that we can quantify networks of any size now through a blockchain, is it enables agency to people across the world. It's not necessarily creating catcoins or meme-coins, it's about being able to invest in networks that wasn't possible before. They way I see it: currently, most people in the world do 'intra-value' trading. You earn your part in a currency that represents your country. In South Africa, I get Rands when I get my salary, and Rands represent South Africa's capability to sustain the currency. This is how most people extract value from society. That's how they get bread on the table. There are other forms of wealth creation, but the barrier to entry to it is too high for most people. Owning interest in other networks (such as bonds or stocks) might be too high. These 'stakes' usually only represent established companies and countries. The normal guy on the street can't invest in Twitter in 2007. They can't get a hand into the IPO. But, these shares represent the same concepts: owning a part of the network effect that that company ensues. Yes, dividends is also reason to keep stocks, but primarily it's to hold an interest (that will hopefully appreciate).

Now, as we all know (in the IT space), a future of automation through technology is happening. The whole trucking industry will probably disappear soon, leaving plenty of people without a job... and people are starting to get angry. Look at what's happening in San Francisco. A Googler already had to deal with people protesting at this home because he is working on self-driving cars (http://arstechnica.com/business/2014/01/protestors-show-up-at-the-doorstep-of-google-self-driving-car-engineer/). No job is safe. And it begs the question: UNTIL we have a completely post-scarcity society (machines providing basic needs for ALL humans), there's going to be quite a topsy-turvy world out there, shakened by the quickening, inevitable change of technology on humanity. New forms of wealth creation and by virtue, ownership of value, can not only provide soft-lands for people suddenly without jobs, but also provide new forms of agency to everyone in the world.

When we can own parts of ownership in any networks, wealth creation means only extending that network.

In this post, Dan Robles (http://www.ingenesist.com/general-info/what-if-everyone-was-a-bitcoin.html), provides an interesting example.

"Now if we were all issuing currencies to each other and it was in all of our best interest that the other is successful, then a “generalized reciprocity” of favors, exchanges, and values would emerge in society.  The value of one’s community would reflect on the value of one’s personal coinage and vice versa.  The incentive to innovate new ways to create value in a community would be staggering having an impact on everything from governance to medical care.  The highest impact humans would become wealthy as everyone invests in their coinage.  Volatility would be reduced as everyone learns to be high impact as well. 

Not unlike any talented actress or gifted athlete, a form of human agency would emerge where some people specialize in the support and representation of high impact persons. Teachers for example, would forego tuition in exchange for a dividend in their student’s future productivity.  Mentors would “cash in” their world experience by teaching people how to be successful instead of competing to the death (literally and figuratively). The things that people would build and create will reflect things that are useful to their stockholders."

I like the teacher example the most. :). There are other examples: what about those people in your community that are the salt of the earth? They are caring, you see them around, they do charity work, etc. The value they provide to society is immeasurable. To sustain that lifestyle in the current form of 'intra-value' value exchange, is difficult. In a world of networked scarcity, these people have the agency to continue providing value to society, but also create wealth for themselves and thus be able to continue doing it.

I've been having discussions with several people on it, and there might still be some technical and philosophical loop-holes (some feedback loops that might go awry), but for a world where we are heading towards, giving people agency through minting scarce resources to any network is an experiment I'd like to see come to fruition.

[Jorge Timón]

On 1/23/14, Simon de la Rouviere <tro...@gmail.com> wrote:
>> No, please, WHY do you want people to create a million more of those?
>
> Relevant points Jorge. I'll try my best to explain.
>
> Personally, the reason why I'm so excited that we can quantify networks of
> any size now through a blockchain, is it enables agency to people across
> the world. It's not necessarily creating catcoins or meme-coins, it's about
>
> being able to invest in networks that wasn't possible before. They way I
> see it: currently, most people in the world do 'intra-value' trading. You
> earn your part in a currency that represents your country. In South Africa,
>
> I get Rands when I get my salary, and Rands represent South Africa's
> capability to sustain the currency. This is how most people extract value
> from society. That's how they get bread on the table. There are other forms

Rands price is dependent on South Africa's economy because that's the
economy the state can charge taxes to.

> of wealth creation, but the barrier to entry to it is too high for most
> people. Owning interest in other networks (such as bonds or stocks) might
> be too high. These 'stakes' usually only represent established companies
> and countries. The normal guy on the street can't invest in Twitter in
> 2007. They can't get a hand into the IPO. But, these shares represent the
> same concepts: owning a part of the network effect that that company
> ensues. Yes, dividends is also reason to keep stocks, but primarily it's to
>
> hold an interest (that will hopefully appreciate).

Private companies can distribute dividends because they have profits.
Real people working with real capital produce real wealth that pays
costs and has these surplus profits.

> Now, as we all know (in the IT space), a future of automation through
> technology is happening. The whole trucking industry will probably
> disappear soon, leaving plenty of people without a job... and people are
> starting to get angry. Look at what's happening in San Francisco. A Googler
>
> already had to deal with people protesting at this home because he is
> working on self-driving cars
> (http://arstechnica.com/business/2014/01/protestors-show-up-at-the-doorstep-of-google-self-driving-car-engineer/).
>
> No job is safe. And it begs the question: UNTIL we have a completely
> post-scarcity society (machines providing basic needs for ALL humans),
> there's going to be quite a topsy-turvy world out there, shakened by the
> quickening, inevitable change of technology on humanity.

I don't subscribe to this ideology that predicts work will end,
neither for bad, nor for good.

http://en.wikipedia.org/wiki/Luddite
http://en.wikipedia.org/wiki/Cornucopian

Humans are social beings and we will always find ways to serve each other.
Technology "kills" certain jobs, liberating that work force to be
employed in other things that society demands.

> New forms of
> wealth creation and by virtue, ownership of value, can not only provide
> soft-lands for people suddenly without jobs, but also provide new forms of
> agency to everyone in the world.

When you say "wealth creation" you seem to imply that monies somehow
create wealth. They don't. They help people organize and specialize,
facilitate exchanges and at maximum, redistribute wealth.
Monies can't create so called "wealth" on their own, monies are just
symbols of value.
Don't confuse the word "horse" with the real horse.

All producers can issue their own IOUs. Their currency represents a
promise of their products in the future. If they abuse the issuance or
don't redeem their promises, they will ruin its price.
The "value" comes from the producer itself, not from the currency.
Let's say I'm a rock star and I issue my own currency.
I could then redeem the currency for tickets for my concerts,
autographs, merchandising and whatever.

I have 2 options.

1) Issue the currency as IOUs.
On demand, to anyone who asks for it, I sell, say antwoordRands at 1 rand each.
That's equivalent to a loan from the buyer to me at 0% interest.
Pretty cool, I'll record the album and then get the IOUs back in my concerts.
1 concert ticket, 200 rands or 200 antwoordRands.
I can always issue more, but everybody knows a many there are at any
given point.

2) Issue them as p2p currency.

I could sell a fixed quantity of 1,000,000 antwoordCoins at 1 rand
each. If you want, I only sell 75% of them and keep the rest or
whatever.
When I'm going touring antwoordCoins are at 200 rands.
So I sell my tickets for 200 rands or 1 antwordCoin, mhmm.

10 years later it has been a long time since I spent my last
antwoordCoin, and for some reason I have to keep accepting them
because someone "invested in my network"?
No, p2p currencies can't be backed by definition.
Ninja and Yolandi don't accept antwoordCoins anymore, why should they
share the product of their labor with some early antwoordCoin
speculators?
If they want people to invest in them, why not sell shares of the band instead?
What do they gain by issuing antwoordCoins instead of antwoordRands or
antwoordShares?
What if antwoordCoins don't have anything to do with Ninja and Yolandi
besides the name? Just like megacoin doesn't have anything to do with
Kim Dotcom?

What is the economic rationale of this big casino of currencies you envision?
I think people will just issue IOUs denominated in something else
(Terras? Valuns? **GRU?) or just shares of a concrete real
investments.
You can't just "invest in a meme" in the abstract. You're not funding
any production, why should you get any interest from that
"investment".
People invest in real capital and businesses. You cannot "invest" in a
currency, you can just speculate with its future value.
By no means Dogecoin nor TulipCoin are "creating wealth".
So called "value" is just moving from hand to hand. People look at
market caps and don't realize that all the bids added together are a
small part of the total supply.
What happens if everybody decides to sell at the same time?
Being treated mostly as "store of value" and not much as a medium of
exchange, what prevents all the users to decide at the same time that
they want to "redeem their value".

I think you're quite confused about "value", interest, shares...
It is true that interest is a complex matter very often studied on top
of flawed assumptions.
But value is just an illusion.

Let me cite Gesell with his great sense of humor when reasoning about
bimetallism definitions on "value":

"""New possibilities are, however, opened up by Dr. Helfferich's
discovery that with some "substances containing value" (Wertstoffe)
the value is not always proportionate to the Substance. The substance
containing the value is greater or smaller than the value of the
substance. He has discovered that the value of silver money is twice
the value of the silver used in its manufacture. Silver money thus
contains value in double concentration, and we have therefore an
extract of value. This important discovery gives a quite new insight
into the nature of value. It shows that value can be extracted,
concentrated and, as it were, separated from its substance. We may
therefore hope that science will at some future date be able to
produce chemically pure value."""

Chemically pure value...hilarious, what a genious.

I suggest you to read the whole chapter, well, the whole book (you can
skip the first 2 parts on land if you're focused on money). You won't
be wasting your time.

https://www.community-exchange.org/docs/Gesell/en/neo/part3/3.htm
https://www.community-exchange.org/docs/Gesell/en/neo

**Global Reference Unit, as opposed to Lietaer's Global Reference
Currency or Terra

> On Thursday, January 23, 2014 2:17:45 PM UTC+2, Jorge Timón wrote:
>>

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[Simon de la Rouviere]

Thanks for the discussion Jorge! Really enjoying this!

> Rands price is dependent on South Africa's economy because that's the economy the state can charge taxes to. 

Agreed, but it's not just that. It's also based on expectation (of current and future value). For example, a corrupt president might have adverse direct effects on the economy, but the far greater impact would be investors being spooked about more future potential problems if a corrupt president is supposedly "steering" the ship: causing a sell-off of Rands in Forex markets.

> Private companies can distribute dividends because they have profits. Real people working with real capital produce real wealth that pays costs and has these surplus profits. 

Absolutely. But do people buy stocks mainly to get dividends, or do they buy stocks to sell later at an appreciated value? Both, but I'd say the latter is the greater reason why people buy shares.

> But value is just an illusion. 

Spot on. Regarding coin, share, currency. Yes. I should clarify. What I want to achieve, or would like to see happen as an experiment is to be able to quantify networks, because as I mentioned previously, it hopefully provides additionally agency to people. This could be done different ways: issue IOUs, shares, or a decentralized coin. Previously this was a bit difficult, but with cryptocurrencies and concepts like colored coins, it is more easily verifiable. Die Antwoord can issue IOUs to shows. They can also issue shares and give away half of it on open market/IPO. But IOUs and shares represent centralization. Some concepts however can't be centralised and doesn't belong to a person or a group. In those cases you'd want that network to be represented with a coin.

However, in some cases where there is a group or individual behind a concept: decentralization provides an incentive to equally share in the concept, and thus grow the network of it. An early speculator might "mine" (doesn't necessarily have to be mining, could be some other decentralized process) a lot of coins, believing they have future value. They then contribute with group or individual. NOW. This is also possible with shares. If you proselytise Apple, in some very, very small way you could through that process increase the price of Apple stock. The individual, or group behind the concept has equal and even greater incentive to acquire the coins (because they represent it), which means the owners of the coins know there's at least a minimal value tied to the coins, because if the group wants to get more of their coin, they'll have to buy it up. This is a bit iffy, yes, because as you mentioned why does Die Antwoord want to share the product of their labour with these speculators? A coin represents a decentralized way to get involved, but more importantly it's a kickstart to a network effect that could be beneficial to Die Antwoord.

Admittedly, I'm trying to articulate what's only a gut feel. I'm doing more research and exploration of networks and value. Perhaps issuing just shares is the better way. It feels like "pre-mines" around concepts, especially when you consider the possibility of quantifying small networks, is a deterrence. It's saying: "look, I want to invest in you, but you can't just get free value, you've got to prove your worth and investment in this coin. And that means by the value you accrue from other coins, you'll have to reinvest in your own coin."

I'm working this through still. But disregarding the "casino of coins", I still think there's a use for creating decentralized coins that still fits within the current scope: keeping them secure and allowing decentralized, voluntary involvement.

At the end of the day, I think with cryptocurrencies, we can start quantifying networks of various sizes, and the benefit it will provide to humanity is that further agency can be provided, because affiliation and barrier to entry to share in it, is much lower. Whether it is through coins, shares, or IOUs remains to be seen. I think at least it's an interesting concept to consider. We already live in the "reputation" economy, where your reputation is considerably important to your opportunities. What if you could actually "spend" chunks of the reputation? Interesting idea.

Gesell's book seems fascinating. On my to-read list! Thanks. Been looking for more literature as I delve into these concepts I've been mulling in my head. I also don't know much about Terras, Valuns or GRU. I've been thinking of units of account as well in a cryptocurrency world (exploring possibly more esoteric units of account). If you have more recommendations on literature in this area, please let me know!

P.S. TulipCoin. Now there's an interesting experiment in a pump and dump coin. How will people react if you explicitly call it a pump and dump? ;)

[Yoni Johnathan Assia]

This is indeed a fascinating discussion.

I want to add 2 insights :
1. People constantly say the value of a goverment issued currency comes from the fact you can use it to pay taxes. What if "taxes" could be paid to belong to a valiable network ? If a community defines not onoy the way to do color mining, but also to extend that so you can use that color to pay for "services" of the network ?
What if a model exists to simply decentrelize goverment issued coins, simply take the central bank and decentrelize it, but still pay taxes to this "goverment" with this coin ? This concepts simply extends the concept of goverment, and provides a decentrelized form of community/network governance.

2. As an example, lets assume the existance of a decentrelized exchange, where each user can post his bid ask orders to either a specific order book or multiple order books.
The value of any coin, depends first and foremost on the volume of that coin, any coin that has value today but has no depth of book, its value is purely speculative (like a lot of alts and meta coins).
So the first interest of any issuer, or a decenreelized exchange, would be to encourage volume, same way that real exchanges today need market makers and pay them to add liquidity to the market.
An example of decenteelized issuance, that would support such an exchange would be, every market order that is being placed in the books, and then being removed (by liquidity taker), color mints a coin, and every market order that removes an order from the book needs to pay a fee of that colored mint.

So every p2p trade by definition, color mints a # of XXCoin, and costs a # of XXCoin (can cost 0 too),

As every type of decentrelized color minting needs, proof of X, in this case this is proof of trade, you create the trade, therefore you add liquidity to the market and stablize the currency, and assuming this is a liquid market, you cannot "fraud" it or color mint on your own, since when you place a MM order, to color mint it you need to the trade to happen, and the only way for you to gurentee that you will buy and sell to youeself is if you are constantly on the top of the order book, which means you are indeed making the spread and liquidity in this market better.

[Simon de la Rouviere]

Regarding decentralized government issued coins and tax. There's a way in which the same thing can be achieved. 10% of each block's tax goes to a specific address, and it's always hard-coded. The government owns that address (could be m-of-n for the financial committee). The 10% is then all tax there is. Trust in the government could be increased if they explicitly (through the blockchain) show where their money is being spent. Some more thoughts I wrote up a while ago on this: http://simondlr.com/post/69782858415/how-regions-can-create-their-own-altcoin-incentivizing.

Interesting thought experiment. :)

[Dominik Zynis]

Another way is for governments or community organizations to create smart properties for projects such sewage, water, roads, and so on and allow the public to vote with their own money as to whether to project should move forward.  This is similar to a local community voting on a municipal bond *US terminology) to finance public works projects.