Quote from: dbt1033 on March 31, 2017, 04:10:49 AM

By having one's coins locked, it also requires people that wish to vote on Decred's future to have "skin in the game". It's not a perfect system, but it does incentive people to vote in Decred's best interest.

My fundamental idea is that as long as one is combining several distinct aspects of a crypto currency into one single mechanism having to do everything, the system becomes or insecure, or centralized, and most of the time, both.

The different aspects to resolve are:
1) finding consensus over valid first spendings.
2) securing this consensus (immutability) once it is firmly established
3) coin creation and seigniorage
4) governance of protocol modifications and evolution
5) rewarding special people who do 1, 2 and/or 4, eventually with 3

The reason that combining these aspects into one single dynamics is problematic, is that you get complicated couplings between them. In my opinion, there are two no-gos : 4) and 5). 4) is orthogonal to immutability. I know that given that crypto currencies are heavily invaded by software people, they have a hard time thinking of something that shouldn't evolve. But crypto currencies are not software, not any more than mathematics is software, even though both domains rely heavily on software to have practical implementations. But the "software implementing a protocol" and "the protocol itself" are two totally distinct things.

The problem with 5) is that you get strategies for optimising obtaining the rewards, which can lead to a serious incentive to go away from the right consensus resolution or the right secularisation of the obtained consensus. So, while it sounds logical that people "helping the system to come to consensus" or "helping the consensus to be secured" are rewarded for their efforts, the very fact of instoring *mechanical* rewards makes that you are open to strategies of reward maximisation, exclusion of less competitive, although honest, contributors to the system, centralization and corruption.

For instance, the very idea that proof of stake should be rewarded is somewhat strange: the higher your stakes in the system, the higher is the importance, for you, that the system is secure and comes to right consensus, because in the end, that determines the market value of the stake !

Finally, another problem is that the rewards are inside the system, while the true rewards depend on market valuation. The market valuation can make that rewards as foreseen inside the system become crazily high, and people are going to kill their mother for those rewards, or become ridiculously small, so that people don't do it "for such small rewards". Reward markets will emerge which will "regulate" aspects of the system that weren't foreseen, and will induce strategies to manipulate said market, like the spamming of blocks in bitcoin.

I think that as long as people are going to go that way, thinking that there should be governance (voting and central protocol power), that there should be rewards, and that all of this should be combined in one single system, one will always end up with a broken protocol in which a few people pump value from the gullible into their pockets and then dictate the fate of the system.

Rewards are a bitch. You fight and cheat for them.

You will find that one will try to patch the difficulties with more and more involved mechanisms, each of them patching a previously recognized problem, and opening 20 doors for new strategies to game the system. It can be a fun experimentation, and as we've seen, bitcoin has been running successfully for more than 8 years before finally hitting seriously the errors in its design. So it can take a long time before the strategies that game the system because of its inherent rewards design, become visible and tangible.
The security and honesty of bitcoin now comes essentially from the investment in asics that some Chinese guy has made and doesn't want to lose immediately. The price of the computer is what still keeps bitcoin floating.