Re: Blockchain-Free Cryptocurrencies: Framework for Truly Decentralised Fast Txns

Quote from: iamnotback on November 10, 2016, 08:54:27 AM

But the security problems (or more realistically the economic centralization problem since large stake holders need insidious means as there isn't sufficient shorting liquidity for them to scorch their earth) shift to the power vacuum of political economics and the inviolable power-law distribution of wealth (beget by economies-of-scale). Yet Satoshi's design also has these centralization problems due to the power vacuum of political economics and the inviolable power-law distribution of wealth (beget by economies-of-scale).

Quote from: iamnotback on November 10, 2016, 11:03:17 AM

Quote from: iamnotback on November 10, 2016, 08:54:27 AM

Is (D)PoS already more realistically resistant to insidious effects of centralization of vested interests "stake" than Satoshi's design?

No.

(D)PoS isn't a free market on transaction fees. Somebody has to pay for the servers whether it is taken out of the collective as "witness fees" from dilution as is the case for Steem. The vested power-law distributed stake interests have a monopoly and can charge (more than the costs up to) the maximum the market can bear, which some allege is also underway in Bitcoin as proof-of-work mining is allegedly centralizing with economies-of-scale.

I am writing something privately more coherently driving towards the generative essence of what I am thinking about in the above quotes:

Power-law Distribution Control

A Nash equilibrium can coexist with coordinated control over greater than 50% of the resources in a consensus ordering system, if there is no rationally better strategy employing said control which when deployed dictates a change to the optimum strategy of any system participant.

For example in a proof-of-work system, whether or not coordinated miners with a significant percentage of the system hashrate are selfish and stubborn mining¹ on new blocks immediately for themselves and propagating them slowly to other miners for a relatively more profitable mining strategy, doesn't dictate or change for the other system participants their optimum mining strategy and their optimum number of confirmations for a specific probability of a double-spend. Actually the concentrations of controlled hashrate even when less than 50% does slightly impact confirmation probabilities⁶, but this is ignored except for very large value transactions.

Another example is that control over all new blocks via control over a majority of the stake in DPoS system, enables a strategy of dictating the level of transaction fees, but it doesn't change the optimum strategy of any participant in the system (other than the futility of the minority stake voting). Whereas for a proof-of-work or non-delegated proof-of-stake system, the optimum strategy of the minority (hashrate or stake respectively) changes (to not mining or staking respectively) because all of their blocks will be orphaned, although effectively in DPoS the majority vote would just choose all the delegates so none would be orphaned.

Another counter example in proof-of-work or proof-of-stake systems is that a strategy of employing majority of the hashrate or stake respectively to issue double-spends does impact the strategy of other participants w.r.t. their computation of probabilities of a double-spend and their non-participation in the system.

The importance of this realization that a Nash equilibrium can coexist with a majority control over the resources of a consensus ordering system, is due to as follows an inviolable fact of physics and the economics of our universe.

Theorem: the control over the resources in every consensus ordering system will be power-law distributed. No counter example will be discovered.

Proof: Smaller mass is more attracted to larger mass because it maximizes the the entropy, aka the information content, of the system.[Moore2016] Lonesome mass has no frame-of-reference thus has a high probability of only one future. It is also possible to relate this to why we must have friction, oscillation, a numerable speed-of-light so the past and future light cones of special relativity don't collapse into undifferentiated voiding all distinguishable existence.

If this theorem holds and I can argue that the strategy of employing majority control over hashrate or stake to issue double-spends or to orphan all minority blocks, is not optimum for rational power-law distributions, then I can claim a Nash equilibrium can exist for consensus ordering systems.

And I do argue that power-law distributions have nothing to gain by destroying the value of the system, because their resources are not liquid and are too large to be offset by available liquidity of shorting the value of the system because equity liquidity is a minority fraction of the market capitalization. Thus it is also presumed that the rational power-law distribution would not even allow a rented 51% hashrate attack. Even a recycled attack seems irrational[Recycled].

However, the power-law distribution majority is not in control if there exist any attacks which only require a minority of resources and/or especially attacks (even if they have a low very probability of success) which either have nothing-at-stake (e.g. proof-of-stake if there is any such minority resources attack) or in any system which doesn't consume (burn) a resource which has a greater value than the probabilistic value of the said attack, thus said attack can be repeated at no cost until it (or no loss when it) succeeds. In which case, a rogue whale might deem it rational to attack and short the value of the system. Distributed Proof-of-Stake (DPoS) could potentially be rationally (perhaps even 51%) attacked by the exchanges (claiming a hacker did it) because they apparently control the private keys for voting, yet don't have contractual ownership and vested interest in the (value of the) stake.

The rational power-law distribution majority might orphan minority blocks, such as for the purpose of having a monopoly on transaction fees or blacklisting some UXTO, if it can't be objectively observed as a 51% attack causing fear of double-spends and protocol changes. Absent a total perspective which would otherwise not be a Byzantine Generals Problem, thus there is no objectivity over whether orphaned blocks are due to a 51% attack in Satoshi's design². Thus Satoshi's design doesn't have a Nash equilibrium, because if minority hashrate miners know there is a 51% attack, then their optimum strategy changes to quit mining. However, pools probably ameloriate this attack. Alternatively a less conspicuous monopoly on transaction fees can accomplished by the power-law distribution rejecting protocols which would otherwise allow transaction rate (supply) to match its demand, e.g. limiting the size of blocks of transactions in a blockchain.

So in addition to evaluating whether a consensus ordering algorithm has a Nash equilibrium, we also want to analyze the impacts given the natural and inviolable power-law distribution control over the resources of the system. Moreover instead of evaluating the design axes of consensus ordering systems only from the perspective of limits of the proportions of rationally self-interested malvolent participants for Byzantine fault tolerance, we should also incorporate the power-law distribution's majority control over the system resources as a potentially positive asset enabling some alternative designs, e.g. DPoS as an alternative to proof-of-work.

Proof-of-Work as Space Heaters Belies Economics of Specialization

Specialization enables economies-of-scale.

An example of an erroneous posited caveat[4] that proof-of-work mining resources would not become power-law distribution centralized due to the posited high electrical cost of dissipating heat in centralized mining farms coupled with the posited free electricity cost of using the waste heat of ASIC mining equipment as space heaters, is (in hindsight) incorrect because:

Two-phase immersion cooling is 4000 times more efficient at removing heat from high-power density data centers[5], reducing the 30 - 50% electricity overhead to 1%[6].
Electricity proximate to hydroelectric generation or subsidized electriciy costs approximately 50 - 75% less than the average electricity cost.
Heating is rarely needed year-round, 24 hours daily, at full output. Not running mining hardware at full output continuously renders its purchase cost depreciation much less economic because the systemic hashrate is always increasing and (because) ASIC efficiency is always increasing[7]. The posited purchase of obsolete mining equipment[8] is incorrect because `MR = MC` so a combination of increased demand for obsolete mining raising its price and weighted profit at the margins increasing thus increasing the mining difficulty so that savings due to waste heat is offset. Closer to home, to make it profitable enough to be worthwhile (to justify the pita of jerryrigging a space heater for equipment not designed for the purpose) requires running so many 10s or 100s of kWH of relatively much less efficient (i.e. obsolete) hardware generating more heat than can be typically utilized (unless infernos are in sufficient decentralized demand).