Quote from: DeathAndTaxes on December 21, 2011, 02:00:22 PM

Quote from: Skybuck on December 21, 2011, 04:15:31 AM

The real question is not if a more efficient system is possible.

The real question is:

What is the most secure system possible ?

So far I have seen two systems:

1. Majority of vote. (suggested alternative coin system).
2. Majority of computational power (bitcoin).

To make it a little more meta (and understand Bitcoin better) I would abstract it this way.

All consensus systems are based on votes. So your two examples are

1. Majority of vote (1 person = 1 vote)
2. Majority of vote (1 hash = 1 vote)
also you could include
3. Majority of vote (1 coin = 1 vote)
4. Majority of vote (1 transaction log of x transactions = 1 vote) <- voted weighted by age of entity (older more active entities are given more weight)
5. Majority of vote (hybrid system included 2+ of the above x OR y )
6. Majority of vote (layered system which requires 2+ of the above x AND y)

This is a nice way of putting it.

My preferred 'most secure' system is different from the above: (requires X, but X is augmented by Y):

votes = (1+coins)^p*(hashes)^(1-p) where 0 < p < 1 [I would suggest p = 0.8 as a good value]

You don't need coins to vote in this system. Coins just give your votes more weight. By contrast, you do need hashes to vote.

The use of random computing outcomes as a voting determinant causes blocks to have a Poisson arrival rate. A mixed system with 0 < p < 1 preserves this Poisson arrival rate. With a pure coin system [where p=1], depending on design, people might be able to 'save up' voting power and intentionally mine several blocks in a row. This makes temporary double spends too easy. Thus, a random arrival rate seems essential. An alternative, pure-coin design with a random arrival rate is a positive expected value lottery (use coins to buy lottery tickets, and win a vote in the lottery).

A lottery is advantageous if the mining community is risk-loving and detrimental if the mining community is risk-averse. My guess is that risk-aversion is more common, so that avoiding a lottery is desirable. Thus, using hashing is a good alternative.

Hashing has other advantages. A mixed coin-hashing voting system provides a transparent mechanism for initial coin distribution. Initially, coins can be mined through pure hashing. By contrast, any pure coin system requires a nonrandom initial coin allocation. This generates some fairness concerns.

Note 1: To give you guys some sense of what these rules would mean... the system with p=0.8 leads to a competitive equilibrium, where miners spend approximately 80% of their capital expenditure on coins and approximately 20% of their capital expenditure on computing power.

Note 2: The case for coin voting seems crystal clear to me. Currently, we have a system where attack costs are measured in electricity and video card depreciation. These costs are incurred even if an attack fails to happen. Ideally, miners should incur costs iff an attack occurs. Resources that are used even if no attack occurs are simply being wasted. Inexplicably, people have act as if resource destruction is necessary and desirable. There is no logical foundation behind this fatalistic attitude. With coin voting, miners hold lots of coins. Attacks negatively affect coin prices and wipe out miner assets. [If necessary, any possible time lag between an attack event and a price change can be handled via a time-lock escrow mechanism.] The key advantage is that miners incur costs only in the event of an actual attack. This generates tremendous resource savings. Resource savings are passed on to users through lower txn costs, lower inflation, AND/OR higher security.

Okay, I'm returning to my burrow now.