bitcoin ETF

2019-Jan-24, Thursday 12:15
mindstalk: (Default)
A well-written 13 page PDF submitted to the SEC, arguing against the approval of a Bitcoin ETF. https://www.sec.gov/comments/sr-cboebzx-2018-040/srcboebzx2018040-4064523-169183.pdf

Highly manipulated penny stock equivalent, with no revenue and negative sum trading, used largely for illegal money transfer, plus unbacked claims of insurance by the ETF proposers, who would be in a position to manipulate the alleged value.
mindstalk: (atheist)
I haven't tried reading the proof yet, but there's an alleged trilemma: correctness, cost-effective, decentralized, pick two. It's plausible, sound very similar to the CAP theorem in distributed computing and databases. (Correctness, Availability, Partition-free -- basically if your nodes are partitioned, you can either shut down and stay correct, or be available and risk conflict when the nodes are re-connected.)
https://blog.dshr.org/2018/08/the-blockchain-trilemma_9.html

There's a list of various paradoxes about cryptocurrency: more users make it worse (more congested), quadratic total storage costs, conflict between users and miners... https://bankunderground.co.uk/2018/11/13/the-seven-deadly-paradoxes-of-cryptocurrency/

I can suggest some math. Say a blockchain is reasonably successful and has 100 million users (Bitcoin aims at competing with the global financial system!) doing an average of one transaction a day[1]. That's 1e8 transactions in under 1e5 seconds, so over 1000 transactions a second. The top blockchains, bitcoin and Ethereum, can handle around 5 transactions a second. See a problem? And a really global system could plausibly need 100,000 transaction a second.

There are some blockchains -- bitshares, EOS -- that claim such capacity, though I've also seen people say that they're not really decentralized, and one study claimed they didn't even measure up to their claims. https://www.prnewswire.com/news-releases/whiteblock-completes-industrys-first-eos-benchmark-testing-and-blockchain-investigation-300742130.html

But let's say some system can handle that many transactions. What's the storage? 20 bytes each for the From and To addresses, say 10 bytes for the amount, 50 bytes per transaction. At the small scale, each node needs to add 50 kB a second to the distributed ledger (which is what a blockchain at heart is.) No big deal. 5 MB at the big scale... still doable.

But imagine bringing up a new node after three years of such activity. 1e8 seconds in three years, so 5e12 or 5e14 bytes -- 5 or 500 Terabytes to download so that you can be a miner too. Eep!

I can imagine a way around that: a blockchain that every N blocks produces an explicit balance sheet, so that you don't have to go through the entire blockchain history to figure out how much someone has. I don't know if that's viable, such balance sheet blocks would be extra-attractive to attack, but I can't say it's unviable either. OTOH, how big is such a sheet? 100 million users, 20 bytes address per user, 10 bytes balance per user, 3 GB. If 3 billion users, 90 GB. Which has to be shipped around and validated by the mining nodes in the time it takes to make a block -- 10 minutes for Bitcoin, 10 seconds for Ethereum, IIRC. So we cut down on the total storage cost but need some really fat bandwidth.

[1] 30 per month. My own records show an average of 2 expenditures a day, or 60 a month. An average worker's month might see 2 paychecks, 1 rent or mortgage payment, 2-3 phone + utility bills, 4 grocery payments, 1 gas or transit pass payment... we're up to 10 a month right there.
mindstalk: (Default)
Kinnami's business model involves publishing a daily master stamp. First on Twitter and Facebook, then (after some weeks of annoying work) on the Ethereum blockchain. What I've learned:

* Once you have some money on the chain, being able to easily send it somewhere else is indeed a heady experience.

* Documentation is kind of shoddy and out of date. Part of the official docs has bug reports saying "this is no longer accurate" from a year ago -- still unfixed.

* Congestion is a huge, huge, huge problem. Ethereum has two 'currencies' associated with it. Ether is the main one, analogous to bitcoins; it's been somewhat volatile in dollars, going between $400 and $1000. But there's also 'gas', which pays for computation and transactions on the blockchain; a transaction includes a gas limit and a gas price (how much Ether you'll spend for an amount of gas.) And *that* price has been crazy volatile, ranging between 1 and 200. A couple days ago it was 1-2 -- which, you know, by normal standards is already hugely volatile, x2 variation -- and today it's around 60, apparently due to some Chinese app or maybe botnet.

Ethereum advocates keep talking about scaling solutions that don't materialize. They've been doing this for some years now.

* There's a family of systems using delegated proof of stake instead of proof of work: BitShares, Steem, EOS. They apparently support far higher transaction rates -- like 30,000/second instead of 3/second. Steem is used by some blogging platform; EOS is a distributed VM like Ethereum that just launched a couple months ago. Possibly I should look into switching to it.

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